Correlation Between Western Asset and Copley Fund

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

By analyzing existing cross correlation between Western Asset Mortgage and Copley Fund Inc, you can compare the effects of market volatilities on Western Asset and Copley Fund 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 Copley Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Copley Fund.

Diversification Opportunities for Western Asset and Copley Fund

0.57

Correlation Coefficient

Western Asset  Copley Fund

Very weak diversification

The 3 months correlation between Western and Copley is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Mortgage and Copley Fund Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copley Fund 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 Mortgage are associated (or correlated) with Copley Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copley Fund has no effect on the direction of Western Asset i.e., Western Asset and Copley Fund go up and down completely randomly.

Pair Corralation between Western Asset and Copley Fund

Considering the 90-day investment horizon Western Asset is expected to generate 1.73 times less return on investment than Copley Fund. But when comparing it to its historical volatility, Western Asset Mortgage is 1.14 times less risky than Copley Fund. It trades about 0.1 of its potential returns per unit of risk. Copley Fund Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  17,369  in Copley Fund Inc on September 19, 2024 and sell it today you would earn a total of  1,015  from holding Copley Fund Inc or generate 5.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Western Asset Mortgage  vs.  Copley Fund Inc

Western Asset Mortgage

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Mortgage are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy primary indicators, Western Asset is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Copley Fund

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Copley Fund Inc are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Copley Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Copley Fund

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

The idea behind Western Asset Mortgage and Copley Fund Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.