Correlation Between Western Asset and Salient International
Can any of the company-specific risk be diversified away by investing in both Western Asset and Salient International 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 Western Asset and Salient International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset High and Salient International Real, you can compare the effects of market volatilities on Western Asset and Salient International 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 Western Asset with a short position of Salient International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Salient International.
Diversification Opportunities for Western Asset and Salient International
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and Salient is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset High and Salient International Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient International and Western Asset 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 Western Asset High are associated (or correlated) with Salient International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient International has no effect on the direction of Western Asset i.e., Western Asset and Salient International go up and down completely randomly.
Pair Corralation between Western Asset and Salient International
Assuming the 90 days horizon Western Asset is expected to generate 1.85 times less return on investment than Salient International. But when comparing it to its historical volatility, Western Asset High is 3.81 times less risky than Salient International. It trades about 0.23 of its potential returns per unit of risk. Salient International Real is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,192 in Salient International Real on August 29, 2024 and sell it today you would earn a total of 138.00 from holding Salient International Real or generate 11.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Asset High vs. Salient International Real
Performance |
| Timeline |
| Western Asset High |
| Salient International |
Western Asset and Salient International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Salient International
The main advantage of trading using opposite Western Asset and Salient International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Salient International 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 Salient International will offset losses from the drop in Salient International's long position.| Western Asset vs. Prudential High Yield | Western Asset vs. HUMANA INC | Western Asset vs. Aquagold International | Western Asset vs. Barloworld Ltd ADR |
| Salient International vs. Goldman Sachs High | Salient International vs. Western Asset High | Salient International vs. Multimanager Lifestyle Aggressive | Salient International vs. Needham Aggressive Growth |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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