Correlation Between Western Asset and Ab Small
Can any of the company-specific risk be diversified away by investing in both Western Asset and Ab Small 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 Ab Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Smash and Ab Small Cap, you can compare the effects of market volatilities on Western Asset and Ab Small 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 Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Ab Small.
Diversification Opportunities for Western Asset and Ab Small
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and QUAZX is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Smash and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap 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 Smash are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Western Asset i.e., Western Asset and Ab Small go up and down completely randomly.
Pair Corralation between Western Asset and Ab Small
Assuming the 90 days horizon Western Asset is expected to generate 8.85 times less return on investment than Ab Small. But when comparing it to its historical volatility, Western Asset Smash is 3.38 times less risky than Ab Small. It trades about 0.04 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,567 in Ab Small Cap on September 14, 2024 and sell it today you would earn a total of 2,329 from holding Ab Small Cap or generate 41.84% 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 Smash vs. Ab Small Cap
Performance |
| Timeline |
| Western Asset Smash |
| Ab Small Cap |
Western Asset and Ab Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Ab Small
The main advantage of trading using opposite Western Asset and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Ab Small 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 Ab Small will offset losses from the drop in Ab Small's long position.| Western Asset vs. Ab Small Cap | Western Asset vs. Scout Small Cap | Western Asset vs. Touchstone Small Cap | Western Asset vs. Df Dent Small |
| Ab Small vs. Ab High Income | Ab Small vs. Needham Aggressive Growth | Ab Small vs. Morningstar Aggressive Growth | Ab Small vs. Siit High Yield |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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