Correlation Between Western Asset and Deutsche Short-term
Can any of the company-specific risk be diversified away by investing in both Western Asset and Deutsche Short-term 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 Deutsche Short-term 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 Deutsche Short Term Municipal, you can compare the effects of market volatilities on Western Asset and Deutsche Short-term 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 Deutsche Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Deutsche Short-term.
Diversification Opportunities for Western Asset and Deutsche Short-term
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and Deutsche is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Deutsche Short Term Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Short Term 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 Deutsche Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Short Term has no effect on the direction of Western Asset i.e., Western Asset and Deutsche Short-term go up and down completely randomly.
Pair Corralation between Western Asset and Deutsche Short-term
Assuming the 90 days horizon Western Asset Municipal is expected to generate 3.14 times more return on investment than Deutsche Short-term. However, Western Asset is 3.14 times more volatile than Deutsche Short Term Municipal. It trades about 0.19 of its potential returns per unit of risk. Deutsche Short Term Municipal is currently generating about 0.12 per unit of risk. If you would invest 678.00 in Western Asset Municipal on August 27, 2025 and sell it today you would earn a total of 18.00 from holding Western Asset Municipal or generate 2.65% 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. Deutsche Short Term Municipal
Performance |
| Timeline |
| Western Asset Municipal |
| Deutsche Short Term |
Western Asset and Deutsche Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Deutsche Short-term
The main advantage of trading using opposite Western Asset and Deutsche Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Deutsche Short-term 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 Deutsche Short-term will offset losses from the drop in Deutsche Short-term's long position.| Western Asset vs. Qs Large Cap | Western Asset vs. Dana Large Cap | Western Asset vs. Legg Mason Bw | Western Asset vs. Transamerica Large Cap |
| Deutsche Short-term vs. Elfun Diversified Fund | Deutsche Short-term vs. Aqr Diversified Arbitrage | Deutsche Short-term vs. Massmutual Premier Diversified | Deutsche Short-term vs. Lord Abbett Diversified |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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