Correlation Between ETFis Series and Western Asset

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

By analyzing existing cross correlation between ETFis Series Trust and Western Asset High, you can compare the effects of market volatilities on ETFis Series and Western Asset 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 ETFis Series with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFis Series and Western Asset.

Diversification Opportunities for ETFis Series and Western Asset

0.37

Correlation Coefficient

ETFis Series  Western Asset

Weak diversification

The 3 months correlation between ETFis and Western is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding ETFis Series Trust and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and ETFis Series 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 ETFis Series Trust are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset High has no effect on the direction of ETFis Series i.e., ETFis Series and Western Asset go up and down completely randomly.

Pair Corralation between ETFis Series and Western Asset

Given the investment horizon of 90 days ETFis Series is expected to generate 3.98 times less return on investment than Western Asset. In addition to that, ETFis Series is 1.46 times more volatile than Western Asset High. It trades about 0.03 of its total potential returns per unit of risk. Western Asset High is currently generating about 0.17 per unit of volatility. If you would invest  1,145  in Western Asset High on December 28, 2024 and sell it today you would earn a total of  48.00  from holding Western Asset High or generate 4.19% return on investment over 90 days.

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

ETFis Series Trust  vs.  Western Asset High

ETFis Series Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ETFis Series Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, ETFis Series is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Western Asset High

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset High are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ETFis Series and Western Asset

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

The idea behind ETFis Series Trust and Western Asset High 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.