Correlation Between Western Assets and Aim Investment

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

Diversification Opportunities for Western Assets and Aim Investment

0.48

Correlation Coefficient

Western Assets  Aim Investment

Very weak diversification

The 3 months correlation between Western and Aim is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Aim Investment Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aim Investment Funds 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 Aim Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aim Investment Funds has no effect on the direction of Western Assets i.e., Western Assets and Aim Investment go up and down completely randomly.

Pair Corralation between Western Assets and Aim Investment

Assuming the 90 days horizon Western Assets is expected to generate 29.1 times less return on investment than Aim Investment. But when comparing it to its historical volatility, Western Assets Emerging is 1.27 times less risky than Aim Investment. It trades about 0.01 of its potential returns per unit of risk. Aim Investment Funds is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  427.00  in Aim Investment Funds on December 28, 2024 and sell it today you would earn a total of  15.00  from holding Aim Investment Funds or generate 3.51% return on investment over 90 days.

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

Western Assets Emerging  vs.  Aim Investment Funds

Western Assets Emerging

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Assets Emerging has generated negative risk-adjusted returns adding no value to fund investors. 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.

Aim Investment Funds

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aim Investment Funds are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aim Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Assets and Aim Investment

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

The idea behind Western Assets Emerging and Aim Investment Funds 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.