Correlation Between Western Asset and CBH

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

Diversification Opportunities for Western Asset and CBH

-0.12

Correlation Coefficient

Western Asset  CBH

Good diversification

The 3 months correlation between Western and CBH is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and CBH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBH 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 CBH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBH has no effect on the direction of Western Asset i.e., Western Asset and CBH go up and down completely randomly.

Pair Corralation between Western Asset and CBH

Considering the 90-day investment horizon Western Asset is expected to generate 4.71 times less return on investment than CBH. In addition to that, Western Asset is 1.71 times more volatile than CBH. It trades about 0.01 of its total potential returns per unit of risk. CBH is currently generating about 0.05 per unit of volatility. If you would invest  830.00  in CBH on October 7, 2024 and sell it today you would earn a total of  89.00  from holding CBH or generate 10.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.66%
Values	Daily Returns

Western Asset High  vs.  CBH

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

CBH

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBH has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, CBH is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Western Asset and CBH

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

The idea behind Western Asset High and CBH 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 Channel module to use Commodity Channel Index to analyze current equity momentum.