Correlation Between Western Asset and Gabelli Healthcare

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

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

Diversification Opportunities for Western Asset and Gabelli Healthcare

0.73

Correlation Coefficient

Western Asset  Gabelli Healthcare

Poor diversification

The 3 months correlation between Western and Gabelli is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Gabelli Healthcare WellnessRx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Healthcare and Western Asset 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 Western Asset Global are associated (or correlated) with Gabelli Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Healthcare has no effect on the direction of Western Asset i.e., Western Asset and Gabelli Healthcare go up and down completely randomly.

Pair Corralation between Western Asset and Gabelli Healthcare

Considering the 90-day investment horizon Western Asset Global is expected to generate 0.94 times more return on investment than Gabelli Healthcare. However, Western Asset Global is 1.06 times less risky than Gabelli Healthcare. It trades about -0.01 of its potential returns per unit of risk. Gabelli Healthcare WellnessRx is currently generating about -0.08 per unit of risk. If you would invest  676.00  in Western Asset Global on September 3, 2024 and sell it today you would lose (3.00) from holding Western Asset Global or give up 0.44% of portfolio value over 90 days.

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

Western Asset Global  vs.  Gabelli Healthcare WellnessRx

Western Asset Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Global has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong technical indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Gabelli Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gabelli Healthcare WellnessRx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Gabelli Healthcare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Gabelli Healthcare

The main advantage of trading using opposite Western Asset and Gabelli Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Gabelli Healthcare 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 Gabelli Healthcare will offset losses from the drop in Gabelli Healthcare's long position.

The idea behind Western Asset Global and Gabelli Healthcare WellnessRx 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.