Correlation Between Adams Natural and Western Asset
Can any of the company-specific risk be diversified away by investing in both Adams Natural 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 Adams Natural and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adams Natural Resources and Western Asset Emerging, you can compare the effects of market volatilities on Adams Natural 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 Adams Natural with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Natural and Western Asset.
Diversification Opportunities for Adams Natural and Western Asset
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adams and Western is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Western Asset Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Emerging and Adams Natural 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 Adams Natural Resources 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 Emerging has no effect on the direction of Adams Natural i.e., Adams Natural and Western Asset go up and down completely randomly.
Pair Corralation between Adams Natural and Western Asset
Considering the 90-day investment horizon Adams Natural is expected to generate 1.33 times less return on investment than Western Asset. In addition to that, Adams Natural is 1.3 times more volatile than Western Asset Emerging. It trades about 0.04 of its total potential returns per unit of risk. Western Asset Emerging is currently generating about 0.07 per unit of volatility. If you would invest 765.00 in Western Asset Emerging on September 3, 2024 and sell it today you would earn a total of 235.00 from holding Western Asset Emerging or generate 30.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adams Natural Resources vs. Western Asset Emerging
Performance |
| Timeline |
| Adams Natural Resources |
| Western Asset Emerging |
Adams Natural and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Natural and Western Asset
The main advantage of trading using opposite Adams Natural and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Natural 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.| Adams Natural vs. Liberty All Star | Adams Natural vs. Tri Continental Closed | Adams Natural vs. Royce Value Closed | Adams Natural vs. Central Securities |
| Western Asset vs. Tekla Healthcare Investors | Western Asset vs. Tekla Life Sciences | Western Asset vs. Cohen Steers Reit | Western Asset vs. XAI Octagon Floating |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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