Correlation Between Western Asset and Rand Capital

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

Diversification Opportunities for Western Asset and Rand Capital

0.43

Correlation Coefficient

Western Asset  Rand Capital

Very weak diversification

The 3 months correlation between Western and Rand is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Rand Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rand Capital Corp 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 Rand Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rand Capital Corp has no effect on the direction of Western Asset i.e., Western Asset and Rand Capital go up and down completely randomly.

Pair Corralation between Western Asset and Rand Capital

Considering the 90-day investment horizon Western Asset is expected to generate 3.94 times less return on investment than Rand Capital. But when comparing it to its historical volatility, Western Asset Global is 4.34 times less risky than Rand Capital. It trades about 0.06 of its potential returns per unit of risk. Rand Capital Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,289  in Rand Capital Corp on September 4, 2024 and sell it today you would earn a total of  338.00  from holding Rand Capital Corp or generate 26.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.17%
Values	Daily Returns

Western Asset Global  vs.  Rand Capital Corp

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.

Rand Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rand Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic 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 Rand Capital

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

The idea behind Western Asset Global and Rand Capital Corp 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 Commodity Directory module to find actively traded commodities issued by global exchanges.