Correlation Between Western Asset and EnLink

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

Diversification Opportunities for Western Asset and EnLink

-0.1

Correlation Coefficient

Western Asset  EnLink

Good diversification

The 3 months correlation between Western and EnLink is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and EnLink Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnLink Midstream Partners 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 EnLink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnLink Midstream Partners has no effect on the direction of Western Asset i.e., Western Asset and EnLink go up and down completely randomly.

Pair Corralation between Western Asset and EnLink

Considering the 90-day investment horizon Western Asset Investment is expected to generate 1.2 times more return on investment than EnLink. However, Western Asset is 1.2 times more volatile than EnLink Midstream Partners. It trades about 0.04 of its potential returns per unit of risk. EnLink Midstream Partners is currently generating about -0.09 per unit of risk. If you would invest  1,653  in Western Asset Investment on December 1, 2024 and sell it today you would earn a total of  14.00  from holding Western Asset Investment or generate 0.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Western Asset Investment  vs.  EnLink Midstream Partners

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 3 (%) 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.

EnLink Midstream Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days EnLink Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EnLink is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and EnLink

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

The idea behind Western Asset Investment and EnLink Midstream Partners 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.