Correlation Between Western Asset and Ffcdax

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

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

Diversification Opportunities for Western Asset and Ffcdax

0.35

Correlation Coefficient

Western Asset  Ffcdax

Weak diversification

The 3 months correlation between Western and Ffcdax is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Ffcdax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ffcdax 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 High are associated (or correlated) with Ffcdax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ffcdax has no effect on the direction of Western Asset i.e., Western Asset and Ffcdax go up and down completely randomly.

Pair Corralation between Western Asset and Ffcdax

Assuming the 90 days horizon Western Asset High is expected to under-perform the Ffcdax. In addition to that, Western Asset is 1.12 times more volatile than Ffcdax. It trades about -0.02 of its total potential returns per unit of risk. Ffcdax is currently generating about -0.01 per unit of volatility. If you would invest  968.00  in Ffcdax on December 22, 2024 and sell it today you would lose (1.00) from holding Ffcdax or give up 0.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Western Asset High  vs.  Ffcdax

Western Asset High

Risk-Adjusted Performance

Very Weak

Over the last 90 days Western Asset High has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ffcdax

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ffcdax has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Ffcdax 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 Asset and Ffcdax

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

The idea behind Western Asset High and Ffcdax 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.