Correlation Between Western Assets and Huber Capital

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

By analyzing existing cross correlation between Western Assets Emerging and Huber Capital Mid, you can compare the effects of market volatilities on Western Assets and Huber Capital 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 Assets with a short position of Huber Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Huber Capital.

Diversification Opportunities for Western Assets and Huber Capital

0.05

Correlation Coefficient

Western Assets  Huber Capital

Significant diversification

The 3 months correlation between Western and Huber is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Huber Capital Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huber Capital Mid and Western Assets 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 Assets Emerging are associated (or correlated) with Huber Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huber Capital Mid has no effect on the direction of Western Assets i.e., Western Assets and Huber Capital go up and down completely randomly.

Pair Corralation between Western Assets and Huber Capital

Assuming the 90 days horizon Western Assets Emerging is expected to generate 0.21 times more return on investment than Huber Capital. However, Western Assets Emerging is 4.72 times less risky than Huber Capital. It trades about 0.06 of its potential returns per unit of risk. Huber Capital Mid is currently generating about -0.08 per unit of risk. If you would invest  1,059  in Western Assets Emerging on December 21, 2024 and sell it today you would earn a total of  10.00  from holding Western Assets Emerging or generate 0.94% return on investment over 90 days.

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

Western Assets Emerging  vs.  Huber Capital Mid

Western Assets Emerging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Assets Emerging are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Western Assets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Huber Capital Mid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huber Capital Mid has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Assets and Huber Capital

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

The idea behind Western Assets Emerging and Huber Capital Mid 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.