Correlation Between Alliancebernstein and Western Asset

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

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

Diversification Opportunities for Alliancebernstein and Western Asset

0.6

Correlation Coefficient

Alliancebernstein  Western Asset

Poor diversification

The 3 months correlation between Alliancebernstein and Western is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alliancebernstein Global High 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 Alliancebernstein 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 Alliancebernstein Global High 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 Alliancebernstein i.e., Alliancebernstein and Western Asset go up and down completely randomly.

Pair Corralation between Alliancebernstein and Western Asset

Considering the 90-day investment horizon Alliancebernstein Global High is expected to under-perform the Western Asset. But the fund apears to be less risky and, when comparing its historical volatility, Alliancebernstein Global High is 1.34 times less risky than Western Asset. The fund trades about -0.15 of its potential returns per unit of risk. The Western Asset High is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,207  in Western Asset High on October 1, 2024 and sell it today you would lose (32.00) from holding Western Asset High or give up 2.65% of portfolio value over 90 days.

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

Alliancebernstein Global High  vs.  Western Asset High

Alliancebernstein

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alliancebernstein Global High has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable basic indicators, Alliancebernstein is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 investors with long positions. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Alliancebernstein and Western Asset

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

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.