Correlation Between WBI Power and Advisors Asset

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

By analyzing existing cross correlation between WBI Power Factor and Advisors Asset Management, you can compare the effects of market volatilities on WBI Power and Advisors 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 WBI Power with a short position of Advisors Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of WBI Power and Advisors Asset.

Diversification Opportunities for WBI Power and Advisors Asset

-0.63

Correlation Coefficient

WBI Power  Advisors Asset

Excellent diversification

The 3 months correlation between WBI and Advisors is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding WBI Power Factor and Advisors Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Asset Management and WBI Power 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 WBI Power Factor are associated (or correlated) with Advisors Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Asset Management has no effect on the direction of WBI Power i.e., WBI Power and Advisors Asset go up and down completely randomly.

Pair Corralation between WBI Power and Advisors Asset

Given the investment horizon of 90 days WBI Power is expected to generate 2.89 times less return on investment than Advisors Asset. In addition to that, WBI Power is 1.01 times more volatile than Advisors Asset Management. It trades about 0.04 of its total potential returns per unit of risk. Advisors Asset Management is currently generating about 0.12 per unit of volatility. If you would invest  1,766  in Advisors Asset Management on October 12, 2024 and sell it today you would earn a total of  243.00  from holding Advisors Asset Management or generate 13.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	70.21%
Values	Daily Returns

WBI Power Factor  vs.  Advisors Asset Management

WBI Power Factor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WBI Power Factor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, WBI Power is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Advisors Asset Management

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Advisors Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather abnormal primary indicators, Advisors Asset may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WBI Power and Advisors Asset

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

The idea behind WBI Power Factor and Advisors Asset Management 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.