Correlation Between Western Asset and Cohen Steers

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

By analyzing existing cross correlation between Western Asset Diversified and Cohen Steers Tax Advantaged, you can compare the effects of market volatilities on Western Asset and Cohen Steers 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 Cohen Steers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Cohen Steers.

Diversification Opportunities for Western Asset and Cohen Steers

0.8

Correlation Coefficient

Western Asset  Cohen Steers

Very poor diversification

The 3 months correlation between Western and Cohen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Cohen Steers Tax Advantaged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cohen Steers Tax 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 Diversified are associated (or correlated) with Cohen Steers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cohen Steers Tax has no effect on the direction of Western Asset i.e., Western Asset and Cohen Steers go up and down completely randomly.

Pair Corralation between Western Asset and Cohen Steers

Considering the 90-day investment horizon Western Asset Diversified is expected to generate 0.8 times more return on investment than Cohen Steers. However, Western Asset Diversified is 1.25 times less risky than Cohen Steers. It trades about 0.17 of its potential returns per unit of risk. Cohen Steers Tax Advantaged is currently generating about 0.06 per unit of risk. If you would invest  1,382  in Western Asset Diversified on December 27, 2024 and sell it today you would earn a total of  73.00  from holding Western Asset Diversified or generate 5.28% return on investment over 90 days.

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

Western Asset Diversified  vs.  Cohen Steers Tax Advantaged

Western Asset Diversified

Risk-Adjusted Performance

Good

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

Cohen Steers Tax

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cohen Steers Tax Advantaged are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Cohen Steers is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Cohen Steers

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

The idea behind Western Asset Diversified and Cohen Steers Tax Advantaged 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.