Correlation Between Western Assets and Moderately Aggressive

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Western Assets and Moderately Aggressive 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 Assets and Moderately Aggressive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Assets Emerging and Moderately Aggressive Balanced, you can compare the effects of market volatilities on Western Assets and Moderately Aggressive 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 Assets with a short position of Moderately Aggressive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Moderately Aggressive.

Diversification Opportunities for Western Assets and Moderately Aggressive

WesternModeratelyDiversified AwayWesternModeratelyDiversified Away100%
0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between Western and Moderately is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Moderately Aggressive Balanced in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderately Aggressive and Western Assets 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 Assets Emerging are associated (or correlated) with Moderately Aggressive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderately Aggressive has no effect on the direction of Western Assets i.e., Western Assets and Moderately Aggressive go up and down completely randomly.

Pair Corralation between Western Assets and Moderately Aggressive

Assuming the 90 days horizon Western Assets Emerging is expected to generate 0.5 times more return on investment than Moderately Aggressive. However, Western Assets Emerging is 1.99 times less risky than Moderately Aggressive. It trades about 0.14 of its potential returns per unit of risk. Moderately Aggressive Balanced is currently generating about -0.14 per unit of risk. If you would invest  1,065  in Western Assets Emerging on November 27, 2024 and sell it today you would earn a total of  8.00  from holding Western Assets Emerging or generate 0.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Western Assets Emerging  vs.  Moderately Aggressive Balanced

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -3-2-10123
JavaScript chart by amCharts 3.21.15XEMDX SAMIX
       Timeline  
Western Assets Emerging 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Western Assets Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Western Assets is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb10.610.6510.710.7510.810.8510.9
Moderately Aggressive 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Moderately Aggressive Balanced has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Moderately Aggressive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb11.811.91212.112.212.312.412.5

Western Assets and Moderately Aggressive Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.99-0.71-0.43-0.15-0.0084750.120.40.680.961.24 1234
JavaScript chart by amCharts 3.21.15XEMDX SAMIX
       Returns  

Pair Trading with Western Assets and Moderately Aggressive

The main advantage of trading using opposite Western Assets and Moderately Aggressive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Moderately Aggressive 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 Moderately Aggressive will offset losses from the drop in Moderately Aggressive's long position.
The idea behind Western Assets Emerging and Moderately Aggressive Balanced 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

Other Complementary Tools

Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Funds Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments