Correlation Between Western Asset and Northern Global
Can any of the company-specific risk be diversified away by investing in both Western Asset and Northern Global at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Western Asset and Northern Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Municipal and Northern Global Sustainability, you can compare the effects of market volatilities on Western Asset and Northern Global and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Western Asset with a short position of Northern Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Northern Global.
Diversification Opportunities for Western Asset and Northern Global
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Northern is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Northern Global Sustainability in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Global Sust and Western Asset is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Western Asset Municipal are associated (or correlated) with Northern Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Global Sust has no effect on the direction of Western Asset i.e., Western Asset and Northern Global go up and down completely randomly.
Pair Corralation between Western Asset and Northern Global
Assuming the 90 days horizon Western Asset Municipal is expected to generate 0.2 times more return on investment than Northern Global. However, Western Asset Municipal is 4.94 times less risky than Northern Global. It trades about -0.21 of its potential returns per unit of risk. Northern Global Sustainability is currently generating about -0.27 per unit of risk. If you would invest 724.00 in Western Asset Municipal on September 25, 2024 and sell it today you would lose (9.00) from holding Western Asset Municipal or give up 1.24% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Western Asset Municipal vs. Northern Global Sustainability
Performance |
Timeline |
Western Asset Municipal |
Northern Global Sust |
Western Asset and Northern Global Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western Asset and Northern Global
The main advantage of trading using opposite Western Asset and Northern Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Northern Global can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Northern Global will offset losses from the drop in Northern Global's long position.Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
Northern Global vs. Leggmason Partners Institutional | Northern Global vs. Arrow Managed Futures | Northern Global vs. Western Asset Municipal | Northern Global vs. T Rowe Price |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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