Correlation Between Western Asset and Tekla Healthcare

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

By analyzing existing cross correlation between Western Asset Emerging and Tekla Healthcare Opportunities, you can compare the effects of market volatilities on Western Asset and Tekla 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 Tekla Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Tekla Healthcare.

Diversification Opportunities for Western Asset and Tekla Healthcare

0.19

Correlation Coefficient

Western Asset  Tekla Healthcare

Average diversification

The 3 months correlation between Western and Tekla is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Emerging and Tekla Healthcare Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekla Healthcare Opp 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 Emerging are associated (or correlated) with Tekla Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekla Healthcare Opp has no effect on the direction of Western Asset i.e., Western Asset and Tekla Healthcare go up and down completely randomly.

Pair Corralation between Western Asset and Tekla Healthcare

Considering the 90-day investment horizon Western Asset Emerging is expected to generate 0.7 times more return on investment than Tekla Healthcare. However, Western Asset Emerging is 1.43 times less risky than Tekla Healthcare. It trades about -0.17 of its potential returns per unit of risk. Tekla Healthcare Opportunities is currently generating about -0.4 per unit of risk. If you would invest  1,003  in Western Asset Emerging on October 4, 2024 and sell it today you would lose (29.00) from holding Western Asset Emerging or give up 2.89% of portfolio value over 90 days.

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

Western Asset Emerging  vs.  Tekla Healthcare Opportunities

Western Asset Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather sound primary indicators, Western Asset is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tekla Healthcare Opp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Opportunities has generated negative risk-adjusted returns adding no value to fund investors. Even with weak performance in the last few months, the Fund's technical indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the fund retail investors.

Pair Trading with Western Asset and Tekla Healthcare

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

The idea behind Western Asset Emerging and Tekla Healthcare Opportunities 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.