Correlation Between Western Asset and Vanguard Short

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

By analyzing existing cross correlation between Western Asset Short and Vanguard Short Term Bond, you can compare the effects of market volatilities on Western Asset and Vanguard Short 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 Vanguard Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Vanguard Short.

Diversification Opportunities for Western Asset and Vanguard Short

0.92

Correlation Coefficient

Western Asset  Vanguard Short

Almost no diversification

The 3 months correlation between Western and Vanguard is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Short and Vanguard Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 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 Short are associated (or correlated) with Vanguard Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Short Term has no effect on the direction of Western Asset i.e., Western Asset and Vanguard Short go up and down completely randomly.

Pair Corralation between Western Asset and Vanguard Short

Given the investment horizon of 90 days Western Asset Short is expected to generate 0.78 times more return on investment than Vanguard Short. However, Western Asset Short is 1.29 times less risky than Vanguard Short. It trades about 0.25 of its potential returns per unit of risk. Vanguard Short Term Bond is currently generating about 0.15 per unit of risk. If you would invest  2,380  in Western Asset Short on May 7, 2025 and sell it today you would earn a total of  42.00  from holding Western Asset Short or generate 1.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Western Asset Short  vs.  Vanguard Short Term Bond

Western Asset Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Short are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Western Asset is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Vanguard Short Term

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Short Term Bond are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Short is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Western Asset and Vanguard Short

The main advantage of trading using opposite Western Asset and Vanguard Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Vanguard Short 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 Vanguard Short will offset losses from the drop in Vanguard Short's long position.

The idea behind Western Asset Short and Vanguard Short Term Bond 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.