Correlation Between Energy Basic and Western Asset
Can any of the company-specific risk be diversified away by investing in both Energy Basic 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 Basic 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 Basic Materials and Western Asset Inflation, you can compare the effects of market volatilities on Energy Basic 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 Basic with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Western Asset.
Diversification Opportunities for Energy Basic and Western Asset
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Energy and Western is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Western Asset Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Inflation and Energy Basic 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 Basic Materials 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 Inflation has no effect on the direction of Energy Basic i.e., Energy Basic and Western Asset go up and down completely randomly.
Pair Corralation between Energy Basic and Western Asset
Assuming the 90 days horizon Energy Basic Materials is expected to generate 2.63 times more return on investment than Western Asset. However, Energy Basic is 2.63 times more volatile than Western Asset Inflation. It trades about 0.02 of its potential returns per unit of risk. Western Asset Inflation is currently generating about 0.02 per unit of risk. If you would invest 1,184 in Energy Basic Materials on September 3, 2024 and sell it today you would earn a total of 92.00 from holding Energy Basic Materials or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Basic Materials vs. Western Asset Inflation
Performance |
| Timeline |
| Energy Basic Materials |
| Western Asset Inflation |
Energy Basic and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Basic and Western Asset
The main advantage of trading using opposite Energy Basic and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic 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 Basic vs. Vanguard Materials Index | Energy Basic vs. T Rowe Price | Energy Basic vs. Gmo Trust | Energy Basic vs. Gmo Resources |
| Western Asset vs. Hennessy Technology Fund | Western Asset vs. Janus Global Technology | Western Asset vs. Fidelity Advisor Technology | Western Asset vs. Science Technology 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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