Correlation Between Western Assets and Wasatch Frontier
Can any of the company-specific risk be diversified away by investing in both Western Assets and Wasatch Frontier 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 Wasatch Frontier 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 Wasatch Frontier Emerging, you can compare the effects of market volatilities on Western Assets and Wasatch Frontier 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 Wasatch Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Assets and Wasatch Frontier.
Diversification Opportunities for Western Assets and Wasatch Frontier
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Wasatch is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Western Assets Emerging and Wasatch Frontier Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Frontier 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 Wasatch Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Frontier Emerging has no effect on the direction of Western Assets i.e., Western Assets and Wasatch Frontier go up and down completely randomly.
Pair Corralation between Western Assets and Wasatch Frontier
Assuming the 90 days horizon Western Assets is expected to generate 5.17 times less return on investment than Wasatch Frontier. But when comparing it to its historical volatility, Western Assets Emerging is 2.54 times less risky than Wasatch Frontier. It trades about 0.06 of its potential returns per unit of risk. Wasatch Frontier Emerging is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 360.00 in Wasatch Frontier Emerging on November 5, 2024 and sell it today you would earn a total of 7.00 from holding Wasatch Frontier Emerging or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Assets Emerging vs. Wasatch Frontier Emerging
Performance |
| Timeline |
| Western Assets Emerging |
| Wasatch Frontier Emerging |
Western Assets and Wasatch Frontier Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Assets and Wasatch Frontier
The main advantage of trading using opposite Western Assets and Wasatch Frontier positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Assets position performs unexpectedly, Wasatch Frontier 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 Wasatch Frontier will offset losses from the drop in Wasatch Frontier's long position.| Western Assets vs. Blackrock Large Cap | Western Assets vs. Tiaa Cref Large Cap Value | Western Assets vs. Ab Large Cap | Western Assets vs. Americafirst Large Cap |
| Wasatch Frontier vs. Fvkvwx | Wasatch Frontier vs. Fznopx | Wasatch Frontier vs. Small Pany Growth | Wasatch Frontier vs. Wabmsx |
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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