Correlation Between Western Asset and IHIT

Can any of the company-specific risk be diversified away by investing in both Western Asset and IHIT 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 IHIT 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 IHIT, you can compare the effects of market volatilities on Western Asset and IHIT 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 IHIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and IHIT.

Diversification Opportunities for Western Asset and IHIT

-0.04

Correlation Coefficient

Western Asset  IHIT

Good diversification

The 3 months correlation between Western and IHIT is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and IHIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHIT 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 IHIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHIT has no effect on the direction of Western Asset i.e., Western Asset and IHIT go up and down completely randomly.

Pair Corralation between Western Asset and IHIT

Considering the 90-day investment horizon Western Asset Global is expected to generate 1.77 times more return on investment than IHIT. However, Western Asset is 1.77 times more volatile than IHIT. It trades about 0.04 of its potential returns per unit of risk. IHIT is currently generating about -0.1 per unit of risk. If you would invest  576.00  in Western Asset Global on October 7, 2024 and sell it today you would earn a total of  89.00  from holding Western Asset Global or generate 15.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	26.21%
Values	Daily Returns

Western Asset Global  vs.  IHIT

Western Asset Global

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Global are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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.

IHIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IHIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, IHIT is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Western Asset and IHIT

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

The idea behind Western Asset Global and IHIT 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.