Correlation Between Stone Ridge and Western Asset
Can any of the company-specific risk be diversified away by investing in both Stone Ridge 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 Stone Ridge and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge High and Western Asset Smash, you can compare the effects of market volatilities on Stone Ridge 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 Stone Ridge with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Western Asset.
Diversification Opportunities for Stone Ridge and Western Asset
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Stone and Western is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge High and Western Asset Smash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Smash and Stone Ridge 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 Stone Ridge High 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 Smash has no effect on the direction of Stone Ridge i.e., Stone Ridge and Western Asset go up and down completely randomly.
Pair Corralation between Stone Ridge and Western Asset
Assuming the 90 days horizon Stone Ridge High is expected to generate 0.65 times more return on investment than Western Asset. However, Stone Ridge High is 1.53 times less risky than Western Asset. It trades about 0.23 of its potential returns per unit of risk. Western Asset Smash is currently generating about 0.03 per unit of risk. If you would invest 673.00 in Stone Ridge High on August 24, 2024 and sell it today you would earn a total of 267.00 from holding Stone Ridge High or generate 39.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Ridge High vs. Western Asset Smash
Performance |
| Timeline |
| Stone Ridge High |
| Western Asset Smash |
Stone Ridge and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Ridge and Western Asset
The main advantage of trading using opposite Stone Ridge and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge 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.| Stone Ridge vs. Jhancock Real Estate | Stone Ridge vs. Deutsche Real Estate | Stone Ridge vs. Dunham Real Estate | Stone Ridge vs. Fidelity Real Estate |
| Western Asset vs. Ab Municipal Income | Western Asset vs. Municipal Total Return | Western Asset vs. Stone Ridge High | Western Asset vs. Bats Series M |
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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