Correlation Between Western Asset and Vanguard Total
Can any of the company-specific risk be diversified away by investing in both Western Asset and Vanguard Total 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 Vanguard Total into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Mortgage and Vanguard Total Bond, you can compare the effects of market volatilities on Western Asset and Vanguard Total 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 Vanguard Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Vanguard Total.
Diversification Opportunities for Western Asset and Vanguard Total
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Vanguard is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and Vanguard Total Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Total Bond 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 Mortgage are associated (or correlated) with Vanguard Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Total Bond has no effect on the direction of Western Asset i.e., Western Asset and Vanguard Total go up and down completely randomly.
Pair Corralation between Western Asset and Vanguard Total
Assuming the 90 days horizon Western Asset is expected to generate 205.0 times less return on investment than Vanguard Total. But when comparing it to its historical volatility, Western Asset Mortgage is 1.14 times less risky than Vanguard Total. It trades about 0.0 of its potential returns per unit of risk. Vanguard Total Bond is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 929.00 in Vanguard Total Bond on February 14, 2024 and sell it today you would earn a total of 12.00 from holding Vanguard Total Bond or generate 1.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Mortgage vs. Vanguard Total Bond
Performance |
| Timeline |
| Western Asset Mortgage |
| Vanguard Total Bond |
Western Asset and Vanguard Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Vanguard Total
The main advantage of trading using opposite Western Asset and Vanguard Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Vanguard Total 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 Vanguard Total will offset losses from the drop in Vanguard Total'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 |
| Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Vanguard Total Bond | Vanguard Total vs. Bond Fund Of |
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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