Correlation Between Cornerstone Strategic and Western Asset
Can any of the company-specific risk be diversified away by investing in both Cornerstone Strategic 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 Cornerstone Strategic and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cornerstone Strategic Value and Western Asset Claymore, you can compare the effects of market volatilities on Cornerstone Strategic 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 Cornerstone Strategic with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cornerstone Strategic and Western Asset.
Diversification Opportunities for Cornerstone Strategic and Western Asset
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Cornerstone and Western is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Cornerstone Strategic Value and Western Asset Claymore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Claymore and Cornerstone Strategic 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 Cornerstone Strategic Value 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 Claymore has no effect on the direction of Cornerstone Strategic i.e., Cornerstone Strategic and Western Asset go up and down completely randomly.
Pair Corralation between Cornerstone Strategic and Western Asset
Considering the 90-day investment horizon Cornerstone Strategic Value is expected to generate 1.85 times more return on investment than Western Asset. However, Cornerstone Strategic is 1.85 times more volatile than Western Asset Claymore. It trades about 0.66 of its potential returns per unit of risk. Western Asset Claymore is currently generating about 0.06 per unit of risk. If you would invest 799.00 in Cornerstone Strategic Value on September 3, 2024 and sell it today you would earn a total of 98.00 from holding Cornerstone Strategic Value or generate 12.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cornerstone Strategic Value vs. Western Asset Claymore
Performance |
| Timeline |
| Cornerstone Strategic |
| Western Asset Claymore |
Cornerstone Strategic and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cornerstone Strategic and Western Asset
The main advantage of trading using opposite Cornerstone Strategic and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cornerstone Strategic 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.The idea behind Cornerstone Strategic Value and Western Asset Claymore 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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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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