Correlation Between Western Asset and Aberdeen International
Can any of the company-specific risk be diversified away by investing in both Western Asset and Aberdeen International 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 Aberdeen International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Municipal and Aberdeen International, you can compare the effects of market volatilities on Western Asset and Aberdeen International 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 Aberdeen International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Aberdeen International.
Diversification Opportunities for Western Asset and Aberdeen International
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and Aberdeen is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Municipal and Aberdeen International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen International 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 Municipal are associated (or correlated) with Aberdeen International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen International has no effect on the direction of Western Asset i.e., Western Asset and Aberdeen International go up and down completely randomly.
Pair Corralation between Western Asset and Aberdeen International
Considering the 90-day investment horizon Western Asset is expected to generate 19.72 times less return on investment than Aberdeen International. But when comparing it to its historical volatility, Western Asset Municipal is 21.11 times less risky than Aberdeen International. It trades about 0.13 of its potential returns per unit of risk. Aberdeen International is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3.00 in Aberdeen International on August 29, 2024 and sell it today you would earn a total of 0.60 from holding Aberdeen International or generate 20.0% 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 Municipal vs. Aberdeen International
Performance |
| Timeline |
| Western Asset Municipal |
| Aberdeen International |
Western Asset and Aberdeen International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Aberdeen International
The main advantage of trading using opposite Western Asset and Aberdeen International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Aberdeen International 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 Aberdeen International will offset losses from the drop in Aberdeen International's long position.| Western Asset vs. Western Asset Managed | Western Asset vs. Blackrock Muniholdings Quality | Western Asset vs. DTF Tax Free | Western Asset vs. John Hancock Income |
| Aberdeen International vs. Invesco High Income | Aberdeen International vs. Blackrock Muniholdings Ny | Aberdeen International vs. MFS Investment Grade | Aberdeen International vs. Federated Premier Municipal |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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