Correlation Between Absolute Convertible and Western Asset
Can any of the company-specific risk be diversified away by investing in both Absolute Convertible 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 Absolute Convertible and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Western Asset California, you can compare the effects of market volatilities on Absolute Convertible 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 Absolute Convertible with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Western Asset.
Diversification Opportunities for Absolute Convertible and Western Asset
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Absolute and Western is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Western Asset California in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset California and Absolute Convertible 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 Absolute Convertible Arbitrage 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 California has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Western Asset go up and down completely randomly.
Pair Corralation between Absolute Convertible and Western Asset
Assuming the 90 days horizon Absolute Convertible is expected to generate 3.26 times less return on investment than Western Asset. But when comparing it to its historical volatility, Absolute Convertible Arbitrage is 3.1 times less risky than Western Asset. It trades about 0.38 of its potential returns per unit of risk. Western Asset California is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 1,397 in Western Asset California on September 13, 2024 and sell it today you would earn a total of 20.00 from holding Western Asset California or generate 1.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Absolute Convertible Arbitrage vs. Western Asset California
Performance |
| Timeline |
| Absolute Convertible |
| Western Asset California |
Absolute Convertible and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Absolute Convertible and Western Asset
The main advantage of trading using opposite Absolute Convertible and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible 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.| Absolute Convertible vs. Advent Claymore Convertible | Absolute Convertible vs. Fidelity Sai Convertible | Absolute Convertible vs. Virtus Convertible | Absolute Convertible vs. Putnam Convertible Incm Gwth |
| Western Asset vs. Lord Abbett Convertible | Western Asset vs. Gabelli Convertible And | Western Asset vs. Absolute Convertible Arbitrage | Western Asset vs. Virtus Convertible |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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