Correlation Between Western Asset and Optimum Small-mid

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

By analyzing existing cross correlation between Western Asset High and Optimum Small Mid Cap, you can compare the effects of market volatilities on Western Asset and Optimum Small-mid 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 Optimum Small-mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Optimum Small-mid.

Diversification Opportunities for Western Asset and Optimum Small-mid

0.67

Correlation Coefficient

Western Asset  Optimum Small-mid

Poor diversification

The 3 months correlation between Western and Optimum is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid 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 High are associated (or correlated) with Optimum Small-mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of Western Asset i.e., Western Asset and Optimum Small-mid go up and down completely randomly.

Pair Corralation between Western Asset and Optimum Small-mid

Assuming the 90 days horizon Western Asset High is expected to generate 0.08 times more return on investment than Optimum Small-mid. However, Western Asset High is 12.81 times less risky than Optimum Small-mid. It trades about -0.31 of its potential returns per unit of risk. Optimum Small Mid Cap is currently generating about -0.35 per unit of risk. If you would invest  708.00  in Western Asset High on October 7, 2024 and sell it today you would lose (7.00) from holding Western Asset High or give up 0.99% of portfolio value over 90 days.

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

Western Asset High  vs.  Optimum Small Mid Cap

Western Asset High

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Optimum Small Mid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Optimum Small Mid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Western Asset and Optimum Small-mid

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

The idea behind Western Asset High and Optimum Small Mid Cap 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.