Correlation Between Western Asset and Powerof Canada

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

Diversification Opportunities for Western Asset and Powerof Canada

-0.77

Correlation Coefficient

Western Asset  Powerof Canada

Pay attention - limited upside

The 3 months correlation between Western and Powerof is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Power of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powerof Canada 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 Powerof Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powerof Canada has no effect on the direction of Western Asset i.e., Western Asset and Powerof Canada go up and down completely randomly.

Pair Corralation between Western Asset and Powerof Canada

Considering the 90-day investment horizon Western Asset Global is expected to under-perform the Powerof Canada. But the etf apears to be less risky and, when comparing its historical volatility, Western Asset Global is 1.83 times less risky than Powerof Canada. The etf trades about -0.17 of its potential returns per unit of risk. The Power of is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,069  in Power of on September 4, 2024 and sell it today you would earn a total of  278.00  from holding Power of or generate 9.06% return on investment over 90 days.

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

Western Asset Global  vs.  Power of

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 investors with long positions. In spite of very healthy fundamental indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Powerof Canada

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Power of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Powerof Canada may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Western Asset and Powerof Canada

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

The idea behind Western Asset Global and Power of 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.