Correlation Between Western Asset and Transamerica Event

Can any of the company-specific risk be diversified away by investing in both Western Asset and Transamerica Event 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 Transamerica Event 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 Transamerica Event Driven, you can compare the effects of market volatilities on Western Asset and Transamerica Event 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 Transamerica Event. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Transamerica Event.

Diversification Opportunities for Western Asset and Transamerica Event

0.0

Correlation Coefficient

Western Asset  Transamerica Event

Pay attention - limited upside

The 3 months correlation between Western and Transamerica is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Transamerica Event Driven in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Event Driven 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 Transamerica Event. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Event Driven has no effect on the direction of Western Asset i.e., Western Asset and Transamerica Event go up and down completely randomly.

Pair Corralation between Western Asset and Transamerica Event

If you would invest  1,500  in Western Asset Diversified on December 25, 2024 and sell it today you would earn a total of  15.00  from holding Western Asset Diversified or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Western Asset Diversified  vs.  Transamerica Event Driven

Western Asset Diversified

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Diversified are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. 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.

Transamerica Event Driven

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transamerica Event Driven has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Transamerica Event 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 Transamerica Event

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

The idea behind Western Asset Diversified and Transamerica Event Driven 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.