Correlation Between Western Asset and IShares Global

Can any of the company-specific risk be diversified away by investing in both Western Asset and IShares Global 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 IShares Global 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 iShares Global 100, you can compare the effects of market volatilities on Western Asset and IShares Global 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 IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and IShares Global.

Diversification Opportunities for Western Asset and IShares Global

-0.14

Correlation Coefficient

Western Asset  IShares Global

Good diversification

The 3 months correlation between Western and IShares is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Claymore and iShares Global 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global 100 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 IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global 100 has no effect on the direction of Western Asset i.e., Western Asset and IShares Global go up and down completely randomly.

Pair Corralation between Western Asset and IShares Global

Considering the 90-day investment horizon Western Asset Claymore is expected to generate 0.47 times more return on investment than IShares Global. However, Western Asset Claymore is 2.11 times less risky than IShares Global. It trades about 0.22 of its potential returns per unit of risk. iShares Global 100 is currently generating about -0.04 per unit of risk. If you would invest  819.00  in Western Asset Claymore on December 20, 2024 and sell it today you would earn a total of  56.00  from holding Western Asset Claymore or generate 6.84% return on investment over 90 days.

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

Western Asset Claymore  vs.  iShares Global 100

Western Asset Claymore

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Claymore are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Western Asset may actually be approaching a critical reversion point that can send shares even higher in April 2025.

iShares Global 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Global 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, IShares Global is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and IShares Global

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

The idea behind Western Asset Claymore and iShares Global 100 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.