Correlation Between Western Asset and Doubleline Income

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

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

Diversification Opportunities for Western Asset and Doubleline Income

0.59

Correlation Coefficient

Western Asset  Doubleline Income

Very weak diversification

The 3 months correlation between Western and Doubleline is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Emerging and Doubleline Income Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doubleline Income 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 Emerging are associated (or correlated) with Doubleline Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doubleline Income has no effect on the direction of Western Asset i.e., Western Asset and Doubleline Income go up and down completely randomly.

Pair Corralation between Western Asset and Doubleline Income

Considering the 90-day investment horizon Western Asset Emerging is expected to generate 1.38 times more return on investment than Doubleline Income. However, Western Asset is 1.38 times more volatile than Doubleline Income Solutions. It trades about 0.3 of its potential returns per unit of risk. Doubleline Income Solutions is currently generating about 0.26 per unit of risk. If you would invest  957.00  in Western Asset Emerging on September 4, 2024 and sell it today you would earn a total of  45.00  from holding Western Asset Emerging or generate 4.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Western Asset Emerging  vs.  Doubleline Income Solutions

Western Asset Emerging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Emerging are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound primary indicators, Western Asset is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Doubleline Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Doubleline Income Solutions are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. Despite quite persistent basic indicators, Doubleline Income is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Western Asset and Doubleline Income

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

The idea behind Western Asset Emerging and Doubleline Income Solutions 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.