Correlation Between Western Asset and NYSE Composite
Can any of the company-specific risk be diversified away by investing in both Western Asset and NYSE Composite 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 NYSE Composite into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Short and NYSE Composite, you can compare the effects of market volatilities on Western Asset and NYSE Composite 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 NYSE Composite. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and NYSE Composite.
Diversification Opportunities for Western Asset and NYSE Composite
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and NYSE is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Short and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite 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 Short are associated (or correlated) with NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of Western Asset i.e., Western Asset and NYSE Composite go up and down completely randomly.
Pair Corralation between Western Asset and NYSE Composite
Given the investment horizon of 90 days Western Asset Short is expected to generate 0.19 times more return on investment than NYSE Composite. However, Western Asset Short is 5.33 times less risky than NYSE Composite. It trades about -0.1 of its potential returns per unit of risk. NYSE Composite is currently generating about -0.18 per unit of risk. If you would invest 2,382 in Western Asset Short on January 30, 2024 and sell it today you would lose (6.00) from holding Western Asset Short or give up 0.25% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Western Asset Short vs. NYSE Composite
Performance |
Timeline |
Western Asset and NYSE Composite Volatility Contrast
Predicted Return Density |
Returns |
Western Asset Short
Pair trading matchups for Western Asset
NYSE Composite
Pair trading matchups for NYSE Composite
Pair Trading with Western Asset and NYSE Composite
The main advantage of trading using opposite Western Asset and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.Western Asset vs. Fidelity Corporate Bond | Western Asset vs. Fidelity Total Bond | Western Asset vs. Fidelity High Yield | Western Asset vs. Fidelity Momentum Factor |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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