Correlation Between Western Assets and William Blair

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Can any of the company-specific risk be diversified away by investing in both Western Assets and William Blair 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 William Blair 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 William Blair Emerging, you can compare the effects of market volatilities on Western Assets and William Blair 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 William Blair. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and William Blair.

Diversification Opportunities for Western Assets and William Blair

WesternWilliamDiversified AwayWesternWilliamDiversified Away100%
0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Western and William is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and William Blair Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on William Blair Emerging 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 William Blair. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of William Blair Emerging has no effect on the direction of Western Assets i.e., Western Assets and William Blair go up and down completely randomly.

Pair Corralation between Western Assets and William Blair

Assuming the 90 days horizon Western Assets is expected to generate 1.9 times less return on investment than William Blair. But when comparing it to its historical volatility, Western Assets Emerging is 2.29 times less risky than William Blair. It trades about 0.07 of its potential returns per unit of risk. William Blair Emerging is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  879.00  in William Blair Emerging on November 21, 2024 and sell it today you would earn a total of  88.00  from holding William Blair Emerging or generate 10.01% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.56%
ValuesDaily Returns

Western Assets Emerging  vs.  William Blair Emerging

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -6-4-20
JavaScript chart by amCharts 3.21.15XEMDX WELNX
       Timeline  
Western Assets Emerging 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Western Assets Emerging are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. 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
William Blair Emerging 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in William Blair Emerging are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, William Blair 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 3.21.15DecJanFebJanFeb8.999.19.29.39.49.59.6

Western Assets and William Blair Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-0.44-0.24-0.0879-0.045-0.0042870.03320.07270.160.360.56 1234
JavaScript chart by amCharts 3.21.15XEMDX WELNX
       Returns  

Pair Trading with Western Assets and William Blair

The main advantage of trading using opposite Western Assets and William Blair positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, William Blair 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 William Blair will offset losses from the drop in William Blair's long position.
The idea behind Western Assets Emerging and William Blair Emerging 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.
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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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