Correlation Between Western Asset and Liberty All

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

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

Diversification Opportunities for Western Asset and Liberty All

-0.05

Correlation Coefficient

Western Asset  Liberty All

Good diversification

The 3 months correlation between Western and Liberty is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Global and Liberty All Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty All Star 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 Global are associated (or correlated) with Liberty All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty All Star has no effect on the direction of Western Asset i.e., Western Asset and Liberty All go up and down completely randomly.

Pair Corralation between Western Asset and Liberty All

Considering the 90-day investment horizon Western Asset is expected to generate 1.77 times less return on investment than Liberty All. But when comparing it to its historical volatility, Western Asset Global is 1.05 times less risky than Liberty All. It trades about 0.05 of its potential returns per unit of risk. Liberty All Star is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  464.00  in Liberty All Star on September 19, 2024 and sell it today you would earn a total of  222.00  from holding Liberty All Star or generate 47.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Western Asset Global  vs.  Liberty All Star

Western Asset Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Global has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong technical indicators, Western Asset is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Liberty All Star

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty All Star are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong basic indicators, Liberty All 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 Liberty All

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

The idea behind Western Asset Global and Liberty All Star 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.