Correlation Between Western Asset and RiverNorth Specialty
Can any of the company-specific risk be diversified away by investing in both Western Asset and RiverNorth Specialty 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 RiverNorth Specialty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Mortgage and RiverNorth Specialty Finance, you can compare the effects of market volatilities on Western Asset and RiverNorth Specialty 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 RiverNorth Specialty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and RiverNorth Specialty.
Diversification Opportunities for Western Asset and RiverNorth Specialty
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Western and RiverNorth is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and RiverNorth Specialty Finance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RiverNorth Specialty 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 Mortgage are associated (or correlated) with RiverNorth Specialty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RiverNorth Specialty has no effect on the direction of Western Asset i.e., Western Asset and RiverNorth Specialty go up and down completely randomly.
Pair Corralation between Western Asset and RiverNorth Specialty
Considering the 90-day investment horizon Western Asset Mortgage is expected to generate 1.61 times more return on investment than RiverNorth Specialty. However, Western Asset is 1.61 times more volatile than RiverNorth Specialty Finance. It trades about 0.1 of its potential returns per unit of risk. RiverNorth Specialty Finance is currently generating about -0.11 per unit of risk. If you would invest 1,186 in Western Asset Mortgage on August 27, 2024 and sell it today you would earn a total of 14.00 from holding Western Asset Mortgage or generate 1.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Mortgage vs. RiverNorth Specialty Finance
Performance |
| Timeline |
| Western Asset Mortgage |
| RiverNorth Specialty |
Western Asset and RiverNorth Specialty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and RiverNorth Specialty
The main advantage of trading using opposite Western Asset and RiverNorth Specialty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, RiverNorth Specialty 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 RiverNorth Specialty will offset losses from the drop in RiverNorth Specialty's long position.| Western Asset vs. Western Asset High | Western Asset vs. Pioneer Municipal High | Western Asset vs. Doubleline Income Solutions | Western Asset vs. Doubleline Yield Opportunities |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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