Correlation Between Western Asset and Manning Napier

Can any of the company-specific risk be diversified away by investing in both Western Asset and Manning Napier 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 Manning Napier into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Western Asset Diversified and Manning Napier Core, you can compare the effects of market volatilities on Western Asset and Manning Napier 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 Manning Napier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Manning Napier.

Diversification Opportunities for Western Asset and Manning Napier

0.9

Correlation Coefficient

Western Asset  Manning Napier

Almost no diversification

The 3 months correlation between Western and Manning is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Manning Napier Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manning Napier Core 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 Diversified are associated (or correlated) with Manning Napier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manning Napier Core has no effect on the direction of Western Asset i.e., Western Asset and Manning Napier go up and down completely randomly.

Pair Corralation between Western Asset and Manning Napier

Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.86 times more return on investment than Manning Napier. However, Western Asset Diversified is 1.16 times less risky than Manning Napier. It trades about -0.06 of its potential returns per unit of risk. Manning Napier Core is currently generating about -0.08 per unit of risk. If you would invest  1,565  in Western Asset Diversified on September 5, 2024 and sell it today you would lose (15.00) from holding Western Asset Diversified or give up 0.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Western Asset Diversified  vs.  Manning Napier Core

Western Asset Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Diversified has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Manning Napier Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manning Napier Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Manning Napier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Manning Napier

The main advantage of trading using opposite Western Asset and Manning Napier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Manning Napier 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 Manning Napier will offset losses from the drop in Manning Napier's long position.

The idea behind Western Asset Diversified and Manning Napier Core pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.