Correlation Between World Energy and Western Asset
Can any of the company-specific risk be diversified away by investing in both World Energy and Western Asset 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 World Energy and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and Western Asset Adjustable, you can compare the effects of market volatilities on World Energy and Western Asset 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 World Energy with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and Western Asset.
Diversification Opportunities for World Energy and Western Asset
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between World and Western is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and Western Asset Adjustable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Adjustable and World Energy 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 World Energy Fund are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Adjustable has no effect on the direction of World Energy i.e., World Energy and Western Asset go up and down completely randomly.
Pair Corralation between World Energy and Western Asset
Assuming the 90 days horizon World Energy Fund is expected to generate 14.67 times more return on investment than Western Asset. However, World Energy is 14.67 times more volatile than Western Asset Adjustable. It trades about 0.09 of its potential returns per unit of risk. Western Asset Adjustable is currently generating about 0.25 per unit of risk. If you would invest 1,361 in World Energy Fund on September 3, 2024 and sell it today you would earn a total of 185.00 from holding World Energy Fund or generate 13.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. Western Asset Adjustable
Performance |
| Timeline |
| World Energy |
| Western Asset Adjustable |
World Energy and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and Western Asset
The main advantage of trading using opposite World Energy and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| World Energy vs. Fisher Small Cap | World Energy vs. Rbc Small Cap | World Energy vs. Us Small Cap | World Energy vs. Oklahoma College Savings |
| Western Asset vs. World Energy Fund | Western Asset vs. Jennison Natural Resources | Western Asset vs. Salient Mlp Energy | Western Asset vs. Energy Basic Materials |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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