Correlation Between Alpine Ultra and Western Asset

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

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

Diversification Opportunities for Alpine Ultra and Western Asset

0.86

Correlation Coefficient

Alpine Ultra  Western Asset

Very poor diversification

The 3 months correlation between Alpine and Western is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Alpine Ultra Short and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total and Alpine Ultra 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 Alpine Ultra 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 Total has no effect on the direction of Alpine Ultra i.e., Alpine Ultra and Western Asset go up and down completely randomly.

Pair Corralation between Alpine Ultra and Western Asset

Assuming the 90 days horizon Alpine Ultra is expected to generate 4.61 times less return on investment than Western Asset. But when comparing it to its historical volatility, Alpine Ultra Short is 3.16 times less risky than Western Asset. It trades about 0.22 of its potential returns per unit of risk. Western Asset Total is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  892.00  in Western Asset Total on December 21, 2024 and sell it today you would earn a total of  29.00  from holding Western Asset Total or generate 3.25% return on investment over 90 days.

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

Alpine Ultra Short  vs.  Western Asset Total

Alpine Ultra Short

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alpine Ultra Short are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Alpine Ultra is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset Total

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Total are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. 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 Alpine Ultra and Western Asset

The main advantage of trading using opposite Alpine Ultra and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpine Ultra 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 Alpine Ultra Short and Western Asset Total 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.