Correlation Between Western Asset and Talen Energy
Can any of the company-specific risk be diversified away by investing in both Western Asset and Talen Energy 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 Talen Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Investment and Talen Energy, you can compare the effects of market volatilities on Western Asset and Talen Energy 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 Talen Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Talen Energy.
Diversification Opportunities for Western Asset and Talen Energy
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Talen is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Investment and Talen Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talen Energy 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 Investment are associated (or correlated) with Talen Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talen Energy has no effect on the direction of Western Asset i.e., Western Asset and Talen Energy go up and down completely randomly.
Pair Corralation between Western Asset and Talen Energy
Considering the 90-day investment horizon Western Asset is expected to generate 1.45 times less return on investment than Talen Energy. But when comparing it to its historical volatility, Western Asset Investment is 12.63 times less risky than Talen Energy. It trades about 0.31 of its potential returns per unit of risk. Talen Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 20,652 in Talen Energy on September 14, 2024 and sell it today you would earn a total of 290.00 from holding Talen Energy or generate 1.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset Investment vs. Talen Energy
Performance |
| Timeline |
| Western Asset Investment |
| Talen Energy |
Western Asset and Talen Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Talen Energy
The main advantage of trading using opposite Western Asset and Talen Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Talen Energy 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 Talen Energy will offset losses from the drop in Talen Energy's long position.| Western Asset vs. Visa Class A | Western Asset vs. Diamond Hill Investment | Western Asset vs. Distoken Acquisition | Western Asset vs. AllianceBernstein Holding LP |
| Talen Energy vs. Western Asset Investment | Talen Energy vs. Anterix | Talen Energy vs. Pinterest | Talen Energy vs. Iridium Communications |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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