Correlation Between Western Asset and First Trust
Can any of the company-specific risk be diversified away by investing in both Western Asset and First Trust 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 First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Mortgage and First Trust Japan, you can compare the effects of market volatilities on Western Asset and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and First Trust.
Diversification Opportunities for Western Asset and First Trust
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and First is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and First Trust Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Japan 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 Mortgage are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Japan has no effect on the direction of Western Asset i.e., Western Asset and First Trust go up and down completely randomly.
Pair Corralation between Western Asset and First Trust
If you would invest 918.00 in Western Asset Mortgage on January 26, 2024 and sell it today you would earn a total of 0.00 from holding Western Asset Mortgage or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Western Asset Mortgage vs. First Trust Japan
Performance |
| Timeline |
| Western Asset Mortgage |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Trust Japan |
Western Asset and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and First Trust
The main advantage of trading using opposite Western Asset and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Western Asset vs. Granite Point Mortgage | Western Asset vs. Invesco Mortgage Capital | Western Asset vs. Ellington Residential Mortgage | Western Asset vs. Chimera Investment |
| First Trust vs. WisdomTree Europe Hedged | First Trust vs. WisdomTree Europe SmallCap | First Trust vs. iShares MSCI Germany |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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