Correlation Between Western Asset and Blackrock Debt

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

By analyzing existing cross correlation between Western Asset High and Blackrock Debt Strategies, you can compare the effects of market volatilities on Western Asset and Blackrock Debt 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 Blackrock Debt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Blackrock Debt.

Diversification Opportunities for Western Asset and Blackrock Debt

0.8

Correlation Coefficient

Western Asset  Blackrock Debt

Very poor diversification

The 3 months correlation between Western and Blackrock is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Blackrock Debt Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Debt Strategies 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 High are associated (or correlated) with Blackrock Debt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Debt Strategies has no effect on the direction of Western Asset i.e., Western Asset and Blackrock Debt go up and down completely randomly.

Pair Corralation between Western Asset and Blackrock Debt

Considering the 90-day investment horizon Western Asset High is expected to generate 1.18 times more return on investment than Blackrock Debt. However, Western Asset is 1.18 times more volatile than Blackrock Debt Strategies. It trades about 0.09 of its potential returns per unit of risk. Blackrock Debt Strategies is currently generating about 0.04 per unit of risk. If you would invest  387.00  in Western Asset High on November 28, 2024 and sell it today you would earn a total of  12.00  from holding Western Asset High or generate 3.1% return on investment over 90 days.

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

Western Asset High  vs.  Blackrock Debt Strategies

Western Asset High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy forward indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Blackrock Debt Strategies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blackrock Debt Strategies are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of comparatively stable basic indicators, Blackrock Debt is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Western Asset and Blackrock Debt

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

The idea behind Western Asset High and Blackrock Debt Strategies 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.