Correlation Between Inverse High and Western Assets
Can any of the company-specific risk be diversified away by investing in both Inverse High 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 Inverse High and Western Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse High Yield and Western Assets Emerging, you can compare the effects of market volatilities on Inverse High 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 Inverse High with a short position of Western Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse High and Western Assets.
Diversification Opportunities for Inverse High and Western Assets
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Inverse and Western is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Inverse High Yield 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 Inverse High 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 Inverse High Yield 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 Inverse High i.e., Inverse High and Western Assets go up and down completely randomly.
Pair Corralation between Inverse High and Western Assets
Assuming the 90 days horizon Inverse High is expected to generate 2.8 times less return on investment than Western Assets. But when comparing it to its historical volatility, Inverse High Yield is 1.26 times less risky than Western Assets. It trades about 0.03 of its potential returns per unit of risk. Western Assets Emerging is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,072 in Western Assets Emerging on September 12, 2024 and sell it today you would earn a total of 17.00 from holding Western Assets Emerging or generate 1.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse High Yield vs. Western Assets Emerging
Performance |
| Timeline |
| Inverse High Yield |
| Western Assets Emerging |
Inverse High and Western Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse High and Western Assets
The main advantage of trading using opposite Inverse High and Western Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse High 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.| Inverse High vs. Hsbc Government Money | Inverse High vs. Franklin Adjustable Government | Inverse High vs. Aig Government Money | Inverse High vs. Inverse Government Long |
| Western Assets vs. Ftfa Franklin Templeton Growth | Western Assets vs. Smallcap Growth Fund | Western Assets vs. T Rowe Price | Western Assets vs. Champlain Mid Cap |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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