Correlation Between Western Asset and ZOETIS

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

Diversification Opportunities for Western Asset and ZOETIS

0.53

Correlation Coefficient

Western Asset  ZOETIS

Very weak diversification

The 3 months correlation between Western and ZOETIS is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and ZOETIS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZOETIS INC 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 ZOETIS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZOETIS INC has no effect on the direction of Western Asset i.e., Western Asset and ZOETIS go up and down completely randomly.

Pair Corralation between Western Asset and ZOETIS

Considering the 90-day investment horizon Western Asset Investment is expected to generate 1.77 times more return on investment than ZOETIS. However, Western Asset is 1.77 times more volatile than ZOETIS INC. It trades about 0.02 of its potential returns per unit of risk. ZOETIS INC is currently generating about 0.0 per unit of risk. If you would invest  1,568  in Western Asset Investment on October 22, 2024 and sell it today you would earn a total of  71.00  from holding Western Asset Investment or generate 4.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.36%
Values	Daily Returns

Western Asset Investment  vs.  ZOETIS INC

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.

ZOETIS INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Western Asset and ZOETIS

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

The idea behind Western Asset Investment and ZOETIS INC 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.