Correlation Between Dow 2x and Western Assets
Can any of the company-specific risk be diversified away by investing in both Dow 2x and Western Assets 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 Dow 2x and Western Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow 2x Strategy and Western Assets Emerging, you can compare the effects of market volatilities on Dow 2x and Western Assets 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 Dow 2x with a short position of Western Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow 2x and Western Assets.
Diversification Opportunities for Dow 2x and Western Assets
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Western is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Dow 2x Strategy and Western Assets Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Assets Emerging and Dow 2x 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 Dow 2x Strategy are associated (or correlated) with Western Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Assets Emerging has no effect on the direction of Dow 2x i.e., Dow 2x and Western Assets go up and down completely randomly.
Pair Corralation between Dow 2x and Western Assets
Assuming the 90 days horizon Dow 2x Strategy is expected to generate 4.39 times more return on investment than Western Assets. However, Dow 2x is 4.39 times more volatile than Western Assets Emerging. It trades about 0.16 of its potential returns per unit of risk. Western Assets Emerging is currently generating about -0.04 per unit of risk. If you would invest 16,643 in Dow 2x Strategy on October 20, 2024 and sell it today you would earn a total of 791.00 from holding Dow 2x Strategy or generate 4.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Dow 2x Strategy vs. Western Assets Emerging
Performance |
| Timeline |
| Dow 2x Strategy |
| Western Assets Emerging |
Dow 2x and Western Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dow 2x and Western Assets
The main advantage of trading using opposite Dow 2x and Western Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow 2x position performs unexpectedly, Western Assets 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 Assets will offset losses from the drop in Western Assets' long position.| Dow 2x vs. Sp 500 2x | Dow 2x vs. Inverse Dow 2x | Dow 2x vs. Nasdaq 100 2x Strategy | Dow 2x vs. Russell 2000 2x |
| Western Assets vs. Angel Oak Financial | Western Assets vs. Prudential Financial Services | Western Assets vs. Vanguard Financials Index | Western Assets vs. 1919 Financial Services |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |