Correlation Between Western Asset and Abrdn Emerging

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

Diversification Opportunities for Western Asset and Abrdn Emerging

0.36

Correlation Coefficient

Western Asset  Abrdn Emerging

Weak diversification

The 3 months correlation between Western and Abrdn is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Abrdn Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abrdn Emerging Markets 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 Abrdn Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abrdn Emerging Markets has no effect on the direction of Western Asset i.e., Western Asset and Abrdn Emerging go up and down completely randomly.

Pair Corralation between Western Asset and Abrdn Emerging

Considering the 90-day investment horizon Western Asset High is expected to generate 0.36 times more return on investment than Abrdn Emerging. However, Western Asset High is 2.79 times less risky than Abrdn Emerging. It trades about 0.15 of its potential returns per unit of risk. Abrdn Emerging Markets is currently generating about 0.01 per unit of risk. If you would invest  1,147  in Western Asset High on December 27, 2024 and sell it today you would earn a total of  45.00  from holding Western Asset High or generate 3.92% return on investment over 90 days.

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

Western Asset High  vs.  Abrdn Emerging Markets

Western Asset High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Abrdn Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Abrdn Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. Despite nearly stable technical and fundamental indicators, Abrdn Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Western Asset and Abrdn Emerging

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

The idea behind Western Asset High and Abrdn Emerging Markets 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.