Correlation Between Western Asset and Analog Devices

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Can any of the company-specific risk be diversified away by investing in both Western Asset and Analog Devices 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 Analog Devices into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Imf and Analog Devices, you can compare the effects of market volatilities on Western Asset and Analog Devices 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 Analog Devices. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Analog Devices.

Diversification Opportunities for Western Asset and Analog Devices

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between Western and Analog is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Imf and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Imf are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Western Asset i.e., Western Asset and Analog Devices go up and down completely randomly.

Pair Corralation between Western Asset and Analog Devices

Considering the 90-day investment horizon Western Asset Imf is expected to generate 0.2 times more return on investment than Analog Devices. However, Western Asset Imf is 5.0 times less risky than Analog Devices. It trades about -0.34 of its potential returns per unit of risk. Analog Devices is currently generating about -0.08 per unit of risk. If you would invest  794.00  in Western Asset Imf on January 20, 2024 and sell it today you would lose (21.00) from holding Western Asset Imf or give up 2.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Western Asset Imf  vs.  Analog Devices

 Performance 
       Timeline  
Western Asset Imf 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Imf are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly strong fundamental drivers, Western Asset is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
Analog Devices 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Western Asset and Analog Devices Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Western Asset and Analog Devices

The main advantage of trading using opposite Western Asset and Analog Devices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, Analog Devices 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 Analog Devices will offset losses from the drop in Analog Devices' long position.
The idea behind Western Asset Imf and Analog Devices 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.
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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