Correlation Between Western Asset and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Western Asset and Sterling Capital 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 Sterling Capital 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 Sterling Capital Virginia, you can compare the effects of market volatilities on Western Asset and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Sterling Capital.
Diversification Opportunities for Western Asset and Sterling Capital
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Western and Sterling is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Diversified and Sterling Capital Virginia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Virginia 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Virginia has no effect on the direction of Western Asset i.e., Western Asset and Sterling Capital go up and down completely randomly.
Pair Corralation between Western Asset and Sterling Capital
Assuming the 90 days horizon Western Asset is expected to generate 2.93 times less return on investment than Sterling Capital. In addition to that, Western Asset is 3.25 times more volatile than Sterling Capital Virginia. It trades about 0.05 of its total potential returns per unit of risk. Sterling Capital Virginia is currently generating about 0.45 per unit of volatility. If you would invest 1,105 in Sterling Capital Virginia on September 12, 2024 and sell it today you would earn a total of 9.00 from holding Sterling Capital Virginia or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Western Asset Diversified vs. Sterling Capital Virginia
Performance |
| Timeline |
| Western Asset Diversified |
| Sterling Capital Virginia |
Western Asset and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Asset and Sterling Capital
The main advantage of trading using opposite Western Asset and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.| Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard 500 Index | Western Asset vs. Vanguard Total Stock | Western Asset vs. Vanguard Total Stock |
| Sterling Capital vs. Huber Capital Diversified | Sterling Capital vs. Blackrock Sm Cap | Sterling Capital vs. Pimco Diversified Income | Sterling Capital vs. Pioneer Diversified High |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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