Correlation Between Western Asset and Acco Brands

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

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

Diversification Opportunities for Western Asset and Acco Brands

-0.23

Correlation Coefficient

Western Asset  Acco Brands

Very good diversification

The 3 months correlation between Western and Acco is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and Acco Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acco Brands 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 Investment are associated (or correlated) with Acco Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acco Brands has no effect on the direction of Western Asset i.e., Western Asset and Acco Brands go up and down completely randomly.

Pair Corralation between Western Asset and Acco Brands

Considering the 90-day investment horizon Western Asset Investment is expected to under-perform the Acco Brands. But the stock apears to be less risky and, when comparing its historical volatility, Western Asset Investment is 5.03 times less risky than Acco Brands. The stock trades about -0.18 of its potential returns per unit of risk. The Acco Brands is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  519.00  in Acco Brands on October 3, 2024 and sell it today you would earn a total of  5.00  from holding Acco Brands or generate 0.96% return on investment over 90 days.

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

Western Asset Investment  vs.  Acco Brands

Western Asset Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Acco Brands

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Acco Brands are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Acco Brands is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Acco Brands

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

The idea behind Western Asset Investment and Acco Brands 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.