Correlation Between RiverNorth Specialty and Western Asset

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

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

Diversification Opportunities for RiverNorth Specialty and Western Asset

0.73

Correlation Coefficient

RiverNorth Specialty  Western Asset

Poor diversification

The 3 months correlation between RiverNorth and Western is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding RiverNorth Specialty Finance 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 RiverNorth Specialty 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 RiverNorth Specialty Finance 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 RiverNorth Specialty i.e., RiverNorth Specialty and Western Asset go up and down completely randomly.

Pair Corralation between RiverNorth Specialty and Western Asset

Considering the 90-day investment horizon RiverNorth Specialty is expected to generate 1.66 times less return on investment than Western Asset. But when comparing it to its historical volatility, RiverNorth Specialty Finance is 1.04 times less risky than Western Asset. It trades about 0.09 of its potential returns per unit of risk. Western Asset High is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  383.00  in Western Asset High on December 30, 2024 and sell it today you would earn a total of  18.00  from holding Western Asset High or generate 4.7% return on investment over 90 days.

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

RiverNorth Specialty Finance  vs.  Western Asset High

RiverNorth Specialty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RiverNorth Specialty Finance are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, RiverNorth Specialty is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy forward 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 RiverNorth Specialty and Western Asset

The main advantage of trading using opposite RiverNorth Specialty and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RiverNorth Specialty 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 RiverNorth Specialty Finance 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.