Correlation Between Western Asset and Eagle Financial

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

Diversification Opportunities for Western Asset and Eagle Financial

-0.79

Correlation Coefficient

Western Asset  Eagle Financial

Pay attention - limited upside

The 3 months correlation between Western and Eagle is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Eagle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle Financial Services 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 Eagle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Financial Services has no effect on the direction of Western Asset i.e., Western Asset and Eagle Financial go up and down completely randomly.

Pair Corralation between Western Asset and Eagle Financial

Considering the 90-day investment horizon Western Asset Global is expected to generate 0.66 times more return on investment than Eagle Financial. However, Western Asset Global is 1.51 times less risky than Eagle Financial. It trades about 0.2 of its potential returns per unit of risk. Eagle Financial Services is currently generating about -0.24 per unit of risk. If you would invest  1,080  in Western Asset Global on December 28, 2024 and sell it today you would earn a total of  67.00  from holding Western Asset Global or generate 6.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	78.33%
Values	Daily Returns

Western Asset Global  vs.  Eagle Financial Services

Western Asset Global

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Global are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Western Asset may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Eagle Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eagle Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Western Asset and Eagle Financial

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

The idea behind Western Asset Global and Eagle Financial Services 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.