Correlation Between Western Asset and Davis Government
Can any of the company-specific risk be diversified away by investing in both Western Asset and Davis Government 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 Davis Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Short and Davis Government Bond, you can compare the effects of market volatilities on Western Asset and Davis Government 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 Davis Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Davis Government.
Diversification Opportunities for Western Asset and Davis Government
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and Davis is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Short and Davis Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Government Bond 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 Short are associated (or correlated) with Davis Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Government Bond has no effect on the direction of Western Asset i.e., Western Asset and Davis Government go up and down completely randomly.
Pair Corralation between Western Asset and Davis Government
Assuming the 90 days horizon Western Asset Short is expected to generate 0.6 times more return on investment than Davis Government. However, Western Asset Short is 1.66 times less risky than Davis Government. It trades about 0.36 of its potential returns per unit of risk. Davis Government Bond is currently generating about 0.16 per unit of risk. If you would invest 498.00 in Western Asset Short on June 2, 2025 and sell it today you would earn a total of 9.00 from holding Western Asset Short or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Short vs. Davis Government Bond
Performance |
| Timeline |
| Western Asset Short |
| Davis Government Bond |
Western Asset and Davis Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Davis Government
The main advantage of trading using opposite Western Asset and Davis Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Davis Government 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 Davis Government will offset losses from the drop in Davis Government'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 |
| Davis Government vs. Rbc Funds Trust | Davis Government vs. Ab Bond Inflation | Davis Government vs. Pace Strategic Fixed | Davis Government vs. Ambrus Core Bond |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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