Correlation Between Energy Services and Western Asset
Can any of the company-specific risk be diversified away by investing in both Energy Services 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 Energy Services and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Services Fund and Western Asset Short, you can compare the effects of market volatilities on Energy Services 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 Energy Services with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Services and Western Asset.
Diversification Opportunities for Energy Services and Western Asset
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Energy and Western is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Energy Services Fund and Western Asset Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Short and Energy Services 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 Energy Services Fund 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 Short has no effect on the direction of Energy Services i.e., Energy Services and Western Asset go up and down completely randomly.
Pair Corralation between Energy Services and Western Asset
Assuming the 90 days horizon Energy Services Fund is expected to generate 8.84 times more return on investment than Western Asset. However, Energy Services is 8.84 times more volatile than Western Asset Short. It trades about 0.03 of its potential returns per unit of risk. Western Asset Short is currently generating about 0.14 per unit of risk. If you would invest 20,738 in Energy Services Fund on November 2, 2024 and sell it today you would earn a total of 150.00 from holding Energy Services Fund or generate 0.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Services Fund vs. Western Asset Short
Performance |
| Timeline |
| Energy Services |
| Western Asset Short |
Energy Services and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Services and Western Asset
The main advantage of trading using opposite Energy Services and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Services 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.| Energy Services vs. Energy Fund Investor | Energy Services vs. Basic Materials Fund | Energy Services vs. Electronics Fund Investor | Energy Services vs. Health Care Fund |
| Western Asset vs. Clearbridge Aggressive Growth | Western Asset vs. Clearbridge Small Cap | Western Asset vs. Qs International Equity | Western Asset vs. Clearbridge Appreciation Fund |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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