Correlation Between Western Asset and Adams Diversified
Can any of the company-specific risk be diversified away by investing in both Western Asset and Adams Diversified 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 Adams Diversified into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Diversified and Adams Diversified Equity, you can compare the effects of market volatilities on Western Asset and Adams Diversified 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 Adams Diversified. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Adams Diversified.
Diversification Opportunities for Western Asset and Adams Diversified
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Western and Adams is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Adams Diversified Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Diversified Equity 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 Diversified are associated (or correlated) with Adams Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Diversified Equity has no effect on the direction of Western Asset i.e., Western Asset and Adams Diversified go up and down completely randomly.
Pair Corralation between Western Asset and Adams Diversified
Assuming the 90 days horizon Western Asset is expected to generate 7.8 times less return on investment than Adams Diversified. But when comparing it to its historical volatility, Western Asset Diversified is 2.72 times less risky than Adams Diversified. It trades about 0.05 of its potential returns per unit of risk. Adams Diversified Equity is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,655 in Adams Diversified Equity on August 24, 2024 and sell it today you would earn a total of 588.00 from holding Adams Diversified Equity or generate 35.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Western Asset Diversified vs. Adams Diversified Equity
Performance |
| Timeline |
| Western Asset Diversified |
| Adams Diversified Equity |
Western Asset and Adams Diversified Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Adams Diversified
The main advantage of trading using opposite Western Asset and Adams Diversified positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Adams Diversified 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 Adams Diversified will offset losses from the drop in Adams Diversified's long position.| Western Asset vs. Dreyfusstandish Global Fixed | Western Asset vs. Ms Global Fixed | Western Asset vs. Us Vector Equity | Western Asset vs. Small Cap Equity |
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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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