Correlation Between Altegris Futures and Western Asset

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

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

Diversification Opportunities for Altegris Futures and Western Asset

0.36

Correlation Coefficient

Altegris Futures  Western Asset

Weak diversification

The 3 months correlation between Altegris and Western is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Altegris Futures Evolution and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Altegris Futures 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 Altegris Futures Evolution 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 High has no effect on the direction of Altegris Futures i.e., Altegris Futures and Western Asset go up and down completely randomly.

Pair Corralation between Altegris Futures and Western Asset

Assuming the 90 days horizon Altegris Futures is expected to generate 1.55 times less return on investment than Western Asset. In addition to that, Altegris Futures is 1.7 times more volatile than Western Asset High. It trades about 0.04 of its total potential returns per unit of risk. Western Asset High is currently generating about 0.1 per unit of volatility. If you would invest  604.00  in Western Asset High on October 23, 2024 and sell it today you would earn a total of  98.00  from holding Western Asset High or generate 16.23% return on investment over 90 days.

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

Altegris Futures Evolution  vs.  Western Asset High

Altegris Futures Evo

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Altegris Futures Evolution are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Altegris Futures is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset High

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 10 (%) 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 Altegris Futures and Western Asset

The main advantage of trading using opposite Altegris Futures and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altegris Futures 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 Altegris Futures Evolution and Western Asset High 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.