Correlation Between Tekla Healthcare and Western Asset

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

By analyzing existing cross correlation between Tekla Healthcare Investors and Western Asset Global, you can compare the effects of market volatilities on Tekla Healthcare and Western Asset 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 Tekla Healthcare with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tekla Healthcare and Western Asset.

Diversification Opportunities for Tekla Healthcare and Western Asset

0.57

Correlation Coefficient

Tekla Healthcare  Western Asset

Very weak diversification

The 3 months correlation between Tekla and Western is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tekla Healthcare Investors and Western Asset Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Global and Tekla Healthcare 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 Tekla Healthcare Investors are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Global has no effect on the direction of Tekla Healthcare i.e., Tekla Healthcare and Western Asset go up and down completely randomly.

Pair Corralation between Tekla Healthcare and Western Asset

Considering the 90-day investment horizon Tekla Healthcare is expected to generate 1.7 times less return on investment than Western Asset. But when comparing it to its historical volatility, Tekla Healthcare Investors is 1.02 times less risky than Western Asset. It trades about 0.02 of its potential returns per unit of risk. Western Asset Global is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  572.00  in Western Asset Global on September 3, 2024 and sell it today you would earn a total of  101.00  from holding Western Asset Global or generate 17.66% return on investment over 90 days.

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

Tekla Healthcare Investors  vs.  Western Asset Global

Tekla Healthcare Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekla Healthcare Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 fund investors. Despite fairly strong technical indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Tekla Healthcare and Western Asset

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

The idea behind Tekla Healthcare Investors and Western Asset Global 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.