Correlation Between Western Assets and Cboe Vest

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

Diversification Opportunities for Western Assets and Cboe Vest

WesternCboeDiversified AwayWesternCboeDiversified Away100%
0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Western and Cboe is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Cboe Vest Sp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cboe Vest Sp 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 Cboe Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cboe Vest Sp has no effect on the direction of Western Assets i.e., Western Assets and Cboe Vest go up and down completely randomly.

Pair Corralation between Western Assets and Cboe Vest

Assuming the 90 days horizon Western Assets Emerging is expected to generate 0.46 times more return on investment than Cboe Vest. However, Western Assets Emerging is 2.17 times less risky than Cboe Vest. It trades about 0.02 of its potential returns per unit of risk. Cboe Vest Sp is currently generating about -0.14 per unit of risk. If you would invest  1,063  in Western Assets Emerging on October 24, 2024 and sell it today you would earn a total of  5.00  from holding Western Assets Emerging or generate 0.47% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy98.33%
ValuesDaily Returns

Western Assets Emerging  vs.  Cboe Vest Sp

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -10-8-6-4-20
JavaScript chart by amCharts 3.21.15XEMDX KNGYX
       Timeline  
Western Assets Emerging 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Western Assets Emerging are ranked lower than 1 (%) 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan10.610.6510.710.7510.810.8510.9
Cboe Vest Sp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cboe Vest Sp has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan11.611.81212.212.412.612.81313.2

Western Assets and Cboe Vest Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.52-0.31-0.1-0.0511-0.0024340.0460.09430.280.49 0.51.01.52.02.53.0
JavaScript chart by amCharts 3.21.15XEMDX KNGYX
       Returns  

Pair Trading with Western Assets and Cboe Vest

The main advantage of trading using opposite Western Assets and Cboe Vest positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Cboe Vest 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 Cboe Vest will offset losses from the drop in Cboe Vest's long position.
The idea behind Western Assets Emerging and Cboe Vest Sp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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