Correlation Between Western Asset and Gabelli Equity

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

By analyzing existing cross correlation between Western Asset Claymore and The Gabelli Equity, you can compare the effects of market volatilities on Western Asset and Gabelli Equity 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 Gabelli Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Gabelli Equity.

Diversification Opportunities for Western Asset and Gabelli Equity

0.67

Correlation Coefficient

Western Asset  Gabelli Equity

Poor diversification

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

Pair Corralation between Western Asset and Gabelli Equity

Considering the 90-day investment horizon Western Asset Claymore is expected to generate 0.84 times more return on investment than Gabelli Equity. However, Western Asset Claymore is 1.19 times less risky than Gabelli Equity. It trades about 0.03 of its potential returns per unit of risk. The Gabelli Equity is currently generating about 0.01 per unit of risk. If you would invest  790.00  in Western Asset Claymore on October 27, 2024 and sell it today you would earn a total of  65.00  from holding Western Asset Claymore or generate 8.23% return on investment over 90 days.

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

Western Asset Claymore  vs.  The Gabelli Equity

Western Asset Claymore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Claymore has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Western Asset is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Gabelli Equity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Gabelli Equity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Western Asset and Gabelli Equity

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

The idea behind Western Asset Claymore and The Gabelli Equity 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..