Correlation Between Rand Capital and Western Asset

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

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

Diversification Opportunities for Rand Capital and Western Asset

0.43

Correlation Coefficient

Rand Capital  Western Asset

Very weak diversification

The 3 months correlation between Rand and Western is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rand Capital Corp and Western Asset Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Global and Rand Capital 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 Rand Capital Corp 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 Global has no effect on the direction of Rand Capital i.e., Rand Capital and Western Asset go up and down completely randomly.

Pair Corralation between Rand Capital and Western Asset

Given the investment horizon of 90 days Rand Capital Corp is expected to under-perform the Western Asset. In addition to that, Rand Capital is 3.91 times more volatile than Western Asset Global. It trades about -0.1 of its total potential returns per unit of risk. Western Asset Global is currently generating about -0.17 per unit of volatility. If you would invest  1,237  in Western Asset Global on September 4, 2024 and sell it today you would lose (67.00) from holding Western Asset Global or give up 5.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Rand Capital Corp  vs.  Western Asset Global

Rand Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rand Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Western Asset Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Global has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Rand Capital and Western Asset

The main advantage of trading using opposite Rand Capital and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rand Capital 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 Rand Capital Corp and Western Asset Global 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.