Correlation Between Morningstar Growth and Western Asset

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

By analyzing existing cross correlation between Morningstar Growth Etf and Western Asset Porate, you can compare the effects of market volatilities on Morningstar Growth and Western Asset 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 Morningstar Growth with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Morningstar Growth and Western Asset.

Diversification Opportunities for Morningstar Growth and Western Asset

0.73

Correlation Coefficient

Morningstar Growth  Western Asset

Poor diversification

The 3 months correlation between Morningstar and Western is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar Growth Etf and Western Asset Porate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Porate and Morningstar Growth 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 Morningstar Growth Etf are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Porate has no effect on the direction of Morningstar Growth i.e., Morningstar Growth and Western Asset go up and down completely randomly.

Pair Corralation between Morningstar Growth and Western Asset

Assuming the 90 days horizon Morningstar Growth Etf is expected to generate 1.46 times more return on investment than Western Asset. However, Morningstar Growth is 1.46 times more volatile than Western Asset Porate. It trades about 0.19 of its potential returns per unit of risk. Western Asset Porate is currently generating about 0.17 per unit of risk. If you would invest  1,193  in Morningstar Growth Etf on March 8, 2024 and sell it today you would earn a total of  23.00  from holding Morningstar Growth Etf or generate 1.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Morningstar Growth Etf  vs.  Western Asset Porate

Morningstar Growth Etf

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Morningstar Growth Etf are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Morningstar Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset Porate

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Porate are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Morningstar Growth and Western Asset

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

The idea behind Morningstar Growth Etf and Western Asset Porate 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.