Correlation Between Chestnut Street and Western Asset

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

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

Diversification Opportunities for Chestnut Street and Western Asset

0.02

Correlation Coefficient

Chestnut Street  Western Asset

Significant diversification

The 3 months correlation between Chestnut and Western is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange 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 Chestnut Street 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 Chestnut Street Exchange 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 Chestnut Street i.e., Chestnut Street and Western Asset go up and down completely randomly.

Pair Corralation between Chestnut Street and Western Asset

Assuming the 90 days horizon Chestnut Street Exchange is expected to under-perform the Western Asset. In addition to that, Chestnut Street is 5.13 times more volatile than Western Asset Total. It trades about -0.04 of its total potential returns per unit of risk. Western Asset Total is currently generating about 0.32 per unit of volatility. If you would invest  890.00  in Western Asset Total on December 23, 2024 and sell it today you would earn a total of  29.00  from holding Western Asset Total or generate 3.26% return on investment over 90 days.

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

Chestnut Street Exchange  vs.  Western Asset Total

Chestnut Street Exchange

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chestnut Street Exchange has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Chestnut Street 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 Chestnut Street and Western Asset

The main advantage of trading using opposite Chestnut Street and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chestnut Street 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 Chestnut Street Exchange 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.