Correlation Between Western Asset and Federated Emerging
Can any of the company-specific risk be diversified away by investing in both Western Asset and Federated Emerging 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 Federated Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Municipal and Federated Emerging Market, you can compare the effects of market volatilities on Western Asset and Federated Emerging 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 Federated Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Federated Emerging.
Diversification Opportunities for Western Asset and Federated Emerging
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Federated is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Federated Emerging Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Emerging Market 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 Municipal are associated (or correlated) with Federated Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Emerging Market has no effect on the direction of Western Asset i.e., Western Asset and Federated Emerging go up and down completely randomly.
Pair Corralation between Western Asset and Federated Emerging
Assuming the 90 days horizon Western Asset is expected to generate 1.58 times less return on investment than Federated Emerging. In addition to that, Western Asset is 1.02 times more volatile than Federated Emerging Market. It trades about 0.21 of its total potential returns per unit of risk. Federated Emerging Market is currently generating about 0.33 per unit of volatility. If you would invest 852.00 in Federated Emerging Market on August 31, 2025 and sell it today you would earn a total of 38.00 from holding Federated Emerging Market or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Federated Emerging Market
Performance |
| Timeline |
| Western Asset Municipal |
| Federated Emerging Market |
Western Asset and Federated Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Federated Emerging
The main advantage of trading using opposite Western Asset and Federated Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Federated Emerging 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 Federated Emerging will offset losses from the drop in Federated Emerging's long position.| Western Asset vs. Towpath Technology | Western Asset vs. Biotechnology Ultrasector Profund | Western Asset vs. Putnam Global Technology | Western Asset vs. Franklin Biotechnology Discovery |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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