Correlation Between Western Asset and Tweedy Browne

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

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

Diversification Opportunities for Western Asset and Tweedy Browne

0.16

Correlation Coefficient

Western Asset  Tweedy Browne

Average diversification

The 3 months correlation between Western and Tweedy is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Imf and Tweedy Browne Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tweedy Browne Global 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 Imf are associated (or correlated) with Tweedy Browne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tweedy Browne Global has no effect on the direction of Western Asset i.e., Western Asset and Tweedy Browne go up and down completely randomly.

Pair Corralation between Western Asset and Tweedy Browne

Considering the 90-day investment horizon Western Asset Imf is expected to generate 0.75 times more return on investment than Tweedy Browne. However, Western Asset Imf is 1.34 times less risky than Tweedy Browne. It trades about 0.22 of its potential returns per unit of risk. Tweedy Browne Global is currently generating about -0.19 per unit of risk. If you would invest  791.00  in Western Asset Imf on August 30, 2024 and sell it today you would earn a total of  21.00  from holding Western Asset Imf or generate 2.65% return on investment over 90 days.

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

Western Asset Imf  vs.  Tweedy Browne Global

Western Asset Imf

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Imf are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong fundamental drivers, Western Asset is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Tweedy Browne Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tweedy Browne Global has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Western Asset and Tweedy Browne

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

The idea behind Western Asset Imf and Tweedy Browne Global 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 Transaction History module to view history of all your transactions and understand their impact on performance.