Correlation Between Western Asset and Invesco High

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

Diversification Opportunities for Western Asset and Invesco High

0.48

Correlation Coefficient

Western Asset  Invesco High

Very weak diversification

The 3 months correlation between Western and Invesco is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and Invesco High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco High Income 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 Invesco High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco High Income has no effect on the direction of Western Asset i.e., Western Asset and Invesco High go up and down completely randomly.

Pair Corralation between Western Asset and Invesco High

Considering the 90-day investment horizon Western Asset Investment is expected to generate 0.8 times more return on investment than Invesco High. However, Western Asset Investment is 1.25 times less risky than Invesco High. It trades about 0.15 of its potential returns per unit of risk. Invesco High Income is currently generating about -0.01 per unit of risk. If you would invest  1,604  in Western Asset Investment on December 28, 2024 and sell it today you would earn a total of  51.00  from holding Western Asset Investment or generate 3.18% return on investment over 90 days.

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

Western Asset Investment  vs.  Invesco High Income

Western Asset Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Investment are ranked lower than 11 (%) 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.

Invesco High Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco High Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Invesco High is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Western Asset and Invesco High

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

The idea behind Western Asset Investment and Invesco High Income 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.