Correlation Between Western Asset and Copper

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Can any of the company-specific risk be diversified away by investing in both Western Asset and Copper 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 Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Claymore and Copper, you can compare the effects of market volatilities on Western Asset and Copper 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 Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Copper.

Diversification Opportunities for Western Asset and Copper

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Western and Copper is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Claymore and Copper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper 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 Claymore are associated (or correlated) with Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper has no effect on the direction of Western Asset i.e., Western Asset and Copper go up and down completely randomly.

Pair Corralation between Western Asset and Copper

Considering the 90-day investment horizon Western Asset is expected to generate 1.07 times less return on investment than Copper. But when comparing it to its historical volatility, Western Asset Claymore is 3.66 times less risky than Copper. It trades about 0.09 of its potential returns per unit of risk. Copper is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  385.00  in Copper on September 1, 2024 and sell it today you would earn a total of  23.00  from holding Copper or generate 5.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy96.91%
ValuesDaily Returns

Western Asset Claymore  vs.  Copper

 Performance 
       Timeline  
Western Asset Claymore 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Claymore are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable forward indicators, Western Asset is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Copper 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Copper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Copper is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Western Asset and Copper Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Western Asset and Copper

The main advantage of trading using opposite Western Asset and Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Copper 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 Copper will offset losses from the drop in Copper's long position.
The idea behind Western Asset Claymore and Copper pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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