Correlation Between Total Return and Western Asset
Can any of the company-specific risk be diversified away by investing in both Total Return and Western Asset 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 Total Return and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Fund and Western Asset E, you can compare the effects of market volatilities on Total Return and Western Asset 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 Total Return with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Western Asset.
Diversification Opportunities for Total Return and Western Asset
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Total and Western is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Fund and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E and Total Return 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 Total Return Fund are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Total Return i.e., Total Return and Western Asset go up and down completely randomly.
Pair Corralation between Total Return and Western Asset
Assuming the 90 days horizon Total Return Fund is expected to generate 1.03 times more return on investment than Western Asset. However, Total Return is 1.03 times more volatile than Western Asset E. It trades about 0.22 of its potential returns per unit of risk. Western Asset E is currently generating about 0.18 per unit of risk. If you would invest 864.00 in Total Return Fund on September 1, 2025 and sell it today you would earn a total of 26.00 from holding Total Return Fund or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Fund vs. Western Asset E
Performance |
| Timeline |
| Total Return |
| Western Asset E |
Total Return and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Western Asset
The main advantage of trading using opposite Total Return and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Total Return vs. Rbb Fund | Total Return vs. Aqr Sustainable Long Short | Total Return vs. Gmo Quality Fund | Total Return vs. Federated Municipal High |
| Western Asset vs. Qs Large Cap | Western Asset vs. Gmo Equity Allocation | Western Asset vs. Balanced Allocation Fund | Western Asset vs. Pnc Balanced Allocation |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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