Correlation Between Western Asset and New Era

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

Diversification Opportunities for Western Asset and New Era

-0.54

Correlation Coefficient

Western Asset  New Era

Excellent diversification

The 3 months correlation between Western and New is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and New Era Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Helium 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 New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Helium has no effect on the direction of Western Asset i.e., Western Asset and New Era go up and down completely randomly.

Pair Corralation between Western Asset and New Era

Considering the 90-day investment horizon Western Asset is expected to generate 66.22 times less return on investment than New Era. But when comparing it to its historical volatility, Western Asset Investment is 41.81 times less risky than New Era. It trades about 0.06 of its potential returns per unit of risk. New Era Helium is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  17.00  in New Era Helium on December 20, 2024 and sell it today you would earn a total of  3.00  from holding New Era Helium or generate 17.65% return on investment over 90 days.

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

Western Asset Investment  vs.  New Era Helium

Western Asset Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

New Era Helium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Era Helium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal fundamental indicators, New Era showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western Asset and New Era

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

The idea behind Western Asset Investment and New Era Helium 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.