Correlation Between Changing Parameters and Western Asset

Can any of the company-specific risk be diversified away by investing in both Changing Parameters 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 Changing Parameters and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Changing Parameters Fund and Western Asset Diversified, you can compare the effects of market volatilities on Changing Parameters 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 Changing Parameters with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Changing Parameters and Western Asset.

Diversification Opportunities for Changing Parameters and Western Asset

0.96

Correlation Coefficient

Changing Parameters  Western Asset

Almost no diversification

The 3 months correlation between Changing and Western is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Changing Parameters Fund and Western Asset Diversified in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Diversified and Changing Parameters 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 Changing Parameters 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 Diversified has no effect on the direction of Changing Parameters i.e., Changing Parameters and Western Asset go up and down completely randomly.

Pair Corralation between Changing Parameters and Western Asset

Assuming the 90 days horizon Changing Parameters Fund is expected to generate 0.38 times more return on investment than Western Asset. However, Changing Parameters Fund is 2.61 times less risky than Western Asset. It trades about 0.42 of its potential returns per unit of risk. Western Asset Diversified is currently generating about 0.16 per unit of risk. If you would invest  1,044  in Changing Parameters Fund on May 17, 2025 and sell it today you would earn a total of  29.00  from holding Changing Parameters Fund or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Changing Parameters Fund  vs.  Western Asset Diversified

Changing Parameters

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in Changing Parameters Fund are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Changing Parameters is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset Diversified

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Diversified are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Changing Parameters and Western Asset

The main advantage of trading using opposite Changing Parameters and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Changing Parameters 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.

The idea behind Changing Parameters Fund and Western Asset Diversified pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.