Correlation Between Eastern and Western Asset
Can any of the company-specific risk be diversified away by investing in both Eastern 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 Eastern and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eastern Co and Western Asset Investment, you can compare the effects of market volatilities on Eastern 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 Eastern with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eastern and Western Asset.
Diversification Opportunities for Eastern and Western Asset
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Eastern and Western is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Eastern Co and Western Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Investment and Eastern 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 Eastern Co 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 Investment has no effect on the direction of Eastern i.e., Eastern and Western Asset go up and down completely randomly.
Pair Corralation between Eastern and Western Asset
Considering the 90-day investment horizon Eastern Co is expected to under-perform the Western Asset. In addition to that, Eastern is 4.08 times more volatile than Western Asset Investment. It trades about -0.11 of its total potential returns per unit of risk. Western Asset Investment is currently generating about -0.26 per unit of volatility. If you would invest 1,785 in Western Asset Investment on August 29, 2024 and sell it today you would lose (112.00) from holding Western Asset Investment or give up 6.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Eastern Co vs. Western Asset Investment
Performance |
| Timeline |
| Eastern |
| Western Asset Investment |
Eastern and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eastern and Western Asset
The main advantage of trading using opposite Eastern and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eastern 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.| Eastern vs. Timken Company | Eastern vs. Lincoln Electric Holdings | Eastern vs. AB SKF | Eastern vs. Kennametal |
| Western Asset vs. Pioneer Floating Rate | Western Asset vs. The Gabelli Equity | Western Asset vs. Pioneer Municipal High | Western Asset vs. Nuveen Global High |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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