Correlation Between Abr Enhanced and Western Asset

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

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

Diversification Opportunities for Abr Enhanced and Western Asset

0.45

Correlation Coefficient

Abr Enhanced  Western Asset

Very weak diversification

The 3 months correlation between Abr and Western is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Abr Enhanced Short and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Abr Enhanced 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 Abr Enhanced Short 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 High has no effect on the direction of Abr Enhanced i.e., Abr Enhanced and Western Asset go up and down completely randomly.

Pair Corralation between Abr Enhanced and Western Asset

Assuming the 90 days horizon Abr Enhanced Short is expected to under-perform the Western Asset. In addition to that, Abr Enhanced is 10.1 times more volatile than Western Asset High. It trades about -0.15 of its total potential returns per unit of risk. Western Asset High is currently generating about -0.34 per unit of volatility. If you would invest  697.00  in Western Asset High on October 4, 2024 and sell it today you would lose (7.00) from holding Western Asset High or give up 1.0% of portfolio value over 90 days.

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

Abr Enhanced Short  vs.  Western Asset High

Abr Enhanced Short

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Abr Enhanced Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Abr Enhanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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 Abr Enhanced and Western Asset

The main advantage of trading using opposite Abr Enhanced and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abr Enhanced 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 Abr Enhanced Short and Western Asset High 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.