Correlation Between Aberdeen Income and Western Asset

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

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

Diversification Opportunities for Aberdeen Income and Western Asset

-0.23

Correlation Coefficient

Aberdeen Income  Western Asset

Very good diversification

The 3 months correlation between Aberdeen and Western is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Aberdeen Income Credit 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 Aberdeen Income 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 Aberdeen Income Credit 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 Aberdeen Income i.e., Aberdeen Income and Western Asset go up and down completely randomly.

Pair Corralation between Aberdeen Income and Western Asset

Considering the 90-day investment horizon Aberdeen Income Credit is expected to under-perform the Western Asset. In addition to that, Aberdeen Income is 2.18 times more volatile than Western Asset High. It trades about -0.33 of its total potential returns per unit of risk. Western Asset High is currently generating about 0.07 per unit of volatility. If you would invest  1,206  in Western Asset High on September 19, 2024 and sell it today you would earn a total of  9.00  from holding Western Asset High or generate 0.75% return on investment over 90 days.

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

Aberdeen Income Credit  vs.  Western Asset High

Aberdeen Income Credit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aberdeen Income Credit has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable fundamental indicators, Aberdeen Income is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Western Asset High

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Aberdeen Income and Western Asset

The main advantage of trading using opposite Aberdeen Income and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aberdeen Income 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 Aberdeen Income Credit 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 Global Correlations module to find global opportunities by holding instruments from different markets.