Correlation Between Aam Select and Western Asset
Can any of the company-specific risk be diversified away by investing in both Aam Select 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 Aam Select and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aam Select Income and Western Asset High, you can compare the effects of market volatilities on Aam Select 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 Aam Select with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aam Select and Western Asset.
Diversification Opportunities for Aam Select and Western Asset
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aam and Western is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Aam Select Income and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Aam Select 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 Aam Select Income 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 High has no effect on the direction of Aam Select i.e., Aam Select and Western Asset go up and down completely randomly.
Pair Corralation between Aam Select and Western Asset
Assuming the 90 days horizon Aam Select is expected to generate 1.84 times less return on investment than Western Asset. In addition to that, Aam Select is 1.35 times more volatile than Western Asset High. It trades about 0.06 of its total potential returns per unit of risk. Western Asset High is currently generating about 0.15 per unit of volatility. If you would invest 598.00 in Western Asset High on August 31, 2024 and sell it today you would earn a total of 108.00 from holding Western Asset High or generate 18.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aam Select Income vs. Western Asset High
Performance |
| Timeline |
| Aam Select Income |
| Western Asset High |
Aam Select and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aam Select and Western Asset
The main advantage of trading using opposite Aam Select and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aam Select 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 Aam Select Income and Western Asset High 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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