Correlation Between Ab Select and Western Asset

Can any of the company-specific risk be diversified away by investing in both Ab Select and Western Asset 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 Ab Select and Western Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ab Select Equity and Western Asset E, you can compare the effects of market volatilities on Ab Select and Western Asset 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 Ab Select with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Select and Western Asset.

Diversification Opportunities for Ab Select and Western Asset

0.37

Correlation Coefficient

Ab Select  Western Asset

Weak diversification

The 3 months correlation between AUUIX and Western is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ab Select Equity and Western Asset E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset E and Ab Select 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 Ab Select Equity are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset E has no effect on the direction of Ab Select i.e., Ab Select and Western Asset go up and down completely randomly.

Pair Corralation between Ab Select and Western Asset

Assuming the 90 days horizon Ab Select Equity is expected to generate 3.44 times more return on investment than Western Asset. However, Ab Select is 3.44 times more volatile than Western Asset E. It trades about 0.15 of its potential returns per unit of risk. Western Asset E is currently generating about 0.32 per unit of risk. If you would invest  2,221  in Ab Select Equity on June 23, 2024 and sell it today you would earn a total of  58.00  from holding Ab Select Equity or generate 2.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ab Select Equity  vs.  Western Asset E

Ab Select Equity

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Select Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ab Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Western Asset E

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset E are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ab Select and Western Asset

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

The idea behind Ab Select Equity and Western Asset E 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.