Correlation Between Western Asset and Logan Ridge

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

Diversification Opportunities for Western Asset and Logan Ridge

-0.51

Correlation Coefficient

Western Asset  Logan Ridge

Excellent diversification

The 3 months correlation between Western and Logan is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Logan Ridge Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logan Ridge Finance 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 Logan Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logan Ridge Finance has no effect on the direction of Western Asset i.e., Western Asset and Logan Ridge go up and down completely randomly.

Pair Corralation between Western Asset and Logan Ridge

Considering the 90-day investment horizon Western Asset Global is expected to generate 0.36 times more return on investment than Logan Ridge. However, Western Asset Global is 2.81 times less risky than Logan Ridge. It trades about 0.2 of its potential returns per unit of risk. Logan Ridge Finance is currently generating about -0.12 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

Western Asset Global  vs.  Logan Ridge Finance

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.

Logan Ridge Finance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Logan Ridge Finance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Western Asset and Logan Ridge

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

The idea behind Western Asset Global and Logan Ridge Finance 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.