Correlation Between Western Asset and Weitz Balanced

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

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

Diversification Opportunities for Western Asset and Weitz Balanced

0.64

Correlation Coefficient

Western Asset  Weitz Balanced

Poor diversification

The 3 months correlation between Western and Weitz is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Weitz Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Weitz Balanced 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 Diversified are associated (or correlated) with Weitz Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Weitz Balanced has no effect on the direction of Western Asset i.e., Western Asset and Weitz Balanced go up and down completely randomly.

Pair Corralation between Western Asset and Weitz Balanced

Assuming the 90 days horizon Western Asset Diversified is expected to generate 0.61 times more return on investment than Weitz Balanced. However, Western Asset Diversified is 1.65 times less risky than Weitz Balanced. It trades about -0.17 of its potential returns per unit of risk. Weitz Balanced is currently generating about -0.11 per unit of risk. If you would invest  1,564  in Western Asset Diversified on October 8, 2024 and sell it today you would lose (45.00) from holding Western Asset Diversified or give up 2.88% of portfolio value over 90 days.

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

Western Asset Diversified  vs.  Weitz Balanced

Western Asset Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Diversified 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.

Weitz Balanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weitz Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Weitz Balanced 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 Weitz Balanced

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

The idea behind Western Asset Diversified and Weitz Balanced 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.