Correlation Between Western Asset and T Rowe
Can any of the company-specific risk be diversified away by investing in both Western Asset and T Rowe 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 T Rowe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Total and T Rowe Price, you can compare the effects of market volatilities on Western Asset and T Rowe 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 T Rowe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and T Rowe.
Diversification Opportunities for Western Asset and T Rowe
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and RRTLX is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Total and T Rowe Price in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rowe Price 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 Total are associated (or correlated) with T Rowe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rowe Price has no effect on the direction of Western Asset i.e., Western Asset and T Rowe go up and down completely randomly.
Pair Corralation between Western Asset and T Rowe
Assuming the 90 days horizon Western Asset Total is expected to under-perform the T Rowe. But the mutual fund apears to be less risky and, when comparing its historical volatility, Western Asset Total is 1.61 times less risky than T Rowe. The mutual fund trades about -0.08 of its potential returns per unit of risk. The T Rowe Price is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,255 in T Rowe Price on September 14, 2024 and sell it today you would earn a total of 17.00 from holding T Rowe Price or generate 1.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.44% |
Values | Daily Returns |
Western Asset Total vs. T Rowe Price
Performance |
Timeline |
Western Asset Total |
T Rowe Price |
Western Asset and T Rowe Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western Asset and T Rowe
The main advantage of trading using opposite Western Asset and T Rowe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, T Rowe 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 T Rowe will offset losses from the drop in T Rowe's long position.Western Asset vs. Franklin Mutual Beacon | Western Asset vs. Templeton Developing Markets | Western Asset vs. Franklin Mutual Global | Western Asset vs. Franklin Mutual Global |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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