Correlation Between Western Asset and Invesco Short
Can any of the company-specific risk be diversified away by investing in both Western Asset and Invesco Short 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 Invesco Short into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Inflation and Invesco Short Term, you can compare the effects of market volatilities on Western Asset and Invesco Short 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 Invesco Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Invesco Short.
Diversification Opportunities for Western Asset and Invesco Short
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Invesco is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Inflation and Invesco Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Short Term 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 Inflation are associated (or correlated) with Invesco Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Short Term has no effect on the direction of Western Asset i.e., Western Asset and Invesco Short go up and down completely randomly.
Pair Corralation between Western Asset and Invesco Short
Assuming the 90 days horizon Western Asset is expected to generate 2.45 times less return on investment than Invesco Short. In addition to that, Western Asset is 2.23 times more volatile than Invesco Short Term. It trades about 0.03 of its total potential returns per unit of risk. Invesco Short Term is currently generating about 0.15 per unit of volatility. If you would invest 766.00 in Invesco Short Term on September 14, 2024 and sell it today you would earn a total of 42.00 from holding Invesco Short Term or generate 5.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Western Asset Inflation vs. Invesco Short Term
Performance |
Timeline |
Western Asset Inflation |
Invesco Short Term |
Western Asset and Invesco Short Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western Asset and Invesco Short
The main advantage of trading using opposite Western Asset and Invesco Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Invesco Short 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 Invesco Short will offset losses from the drop in Invesco Short's long position.Western Asset vs. Goldman Sachs Clean | Western Asset vs. Short Precious Metals | Western Asset vs. Gold And Precious | Western Asset vs. Fidelity Advisor Gold |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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