Correlation Between Western Asset and Royce Small-cap
Can any of the company-specific risk be diversified away by investing in both Western Asset and Royce Small-cap 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 Royce Small-cap 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 Royce Small Cap Value, you can compare the effects of market volatilities on Western Asset and Royce Small-cap 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 Royce Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Royce Small-cap.
Diversification Opportunities for Western Asset and Royce Small-cap
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Royce is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Royce Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Small Cap 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 Royce Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Small Cap has no effect on the direction of Western Asset i.e., Western Asset and Royce Small-cap go up and down completely randomly.
Pair Corralation between Western Asset and Royce Small-cap
Assuming the 90 days horizon Western Asset Municipal is expected to generate 0.15 times more return on investment than Royce Small-cap. However, Western Asset Municipal is 6.47 times less risky than Royce Small-cap. It trades about 0.08 of its potential returns per unit of risk. Royce Small Cap Value is currently generating about 0.0 per unit of risk. If you would invest 690.00 in Western Asset Municipal on September 8, 2025 and sell it today you would earn a total of 6.00 from holding Western Asset Municipal or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Municipal vs. Royce Small Cap Value
Performance |
| Timeline |
| Western Asset Municipal |
| Royce Small Cap |
Western Asset and Royce Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Royce Small-cap
The main advantage of trading using opposite Western Asset and Royce Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Royce Small-cap 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 Royce Small-cap will offset losses from the drop in Royce Small-cap's long position.| Western Asset vs. Aig Government Money | Western Asset vs. Transamerica Financial Life | Western Asset vs. Franklin Government Money | Western Asset vs. Ab Government Exchange |
| Royce Small-cap vs. Neuberger Berman High | Royce Small-cap vs. Simt Tax Managed International | Royce Small-cap vs. Dreyfus Opportunistic Small | Royce Small-cap vs. Royce Micro Cap Fund |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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