Correlation Between Western Asset and Pgim High

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

Diversification Opportunities for Western Asset and Pgim High

0.69

Correlation Coefficient

Western Asset  Pgim High

Poor diversification

The 3 months correlation between Western and Pgim is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Pgim High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pgim High Yield 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 Pgim High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pgim High Yield has no effect on the direction of Western Asset i.e., Western Asset and Pgim High go up and down completely randomly.

Pair Corralation between Western Asset and Pgim High

Considering the 90-day investment horizon Western Asset is expected to generate 2.1 times less return on investment than Pgim High. In addition to that, Western Asset is 1.34 times more volatile than Pgim High Yield. It trades about 0.03 of its total potential returns per unit of risk. Pgim High Yield is currently generating about 0.08 per unit of volatility. If you would invest  1,053  in Pgim High Yield on October 15, 2024 and sell it today you would earn a total of  334.00  from holding Pgim High Yield or generate 31.72% return on investment over 90 days.

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

Western Asset Global  vs.  Pgim High Yield

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.

Pgim High Yield

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pgim High Yield are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound basic indicators, Pgim High is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Western Asset and Pgim High

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

The idea behind Western Asset Global and Pgim High Yield 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.