Correlation Between Western Asset and Central Europe
Can any of the company-specific risk be diversified away by investing in both Western Asset and Central Europe 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 Central Europe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset High and Central Europe Russia, you can compare the effects of market volatilities on Western Asset and Central Europe 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 Central Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Central Europe.
Diversification Opportunities for Western Asset and Central Europe
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Western and Central is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Central Europe Russia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Europe Russia 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 High are associated (or correlated) with Central Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Europe Russia has no effect on the direction of Western Asset i.e., Western Asset and Central Europe go up and down completely randomly.
Pair Corralation between Western Asset and Central Europe
Considering the 90-day investment horizon Western Asset is expected to generate 8.38 times less return on investment than Central Europe. But when comparing it to its historical volatility, Western Asset High is 3.69 times less risky than Central Europe. It trades about 0.08 of its potential returns per unit of risk. Central Europe Russia is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,065 in Central Europe Russia on August 30, 2024 and sell it today you would earn a total of 116.00 from holding Central Europe Russia or generate 10.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. Central Europe Russia
Performance |
| Timeline |
| Western Asset High |
| Central Europe Russia |
Western Asset and Central Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Central Europe
The main advantage of trading using opposite Western Asset and Central Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Central Europe 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 Central Europe will offset losses from the drop in Central Europe's long position.| Western Asset vs. Western Asset Global | Western Asset vs. Western Asset Global | Western Asset vs. European Equity Closed | Western Asset vs. Western Asset High |
| Central Europe vs. Aberdeen Asia Pacific If | Central Europe vs. Aberdeen Japan Equity | Central Europe vs. Stone Harbor Emerging | Central Europe vs. Tortoise Pipeline And |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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