Correlation Between Miller/howard High and Western Asset

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

By analyzing existing cross correlation between Millerhoward High Income and Western Asset High, you can compare the effects of market volatilities on Miller/howard High 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 Miller/howard High with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Miller/howard High and Western Asset.

Diversification Opportunities for Miller/howard High and Western Asset

0.56

Correlation Coefficient

Miller/howard High  Western Asset

Very weak diversification

The 3 months correlation between Miller/howard and Western is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Millerhoward High Income and Western Asset High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset High and Miller/howard High 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 Millerhoward High Income 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 High has no effect on the direction of Miller/howard High i.e., Miller/howard High and Western Asset go up and down completely randomly.

Pair Corralation between Miller/howard High and Western Asset

Considering the 90-day investment horizon Millerhoward High Income is expected to generate 1.07 times more return on investment than Western Asset. However, Miller/howard High is 1.07 times more volatile than Western Asset High. It trades about 0.17 of its potential returns per unit of risk. Western Asset High is currently generating about 0.1 per unit of risk. If you would invest  1,185  in Millerhoward High Income on September 5, 2024 and sell it today you would earn a total of  71.00  from holding Millerhoward High Income or generate 5.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	87.5%
Values	Daily Returns

Millerhoward High Income  vs.  Western Asset High

Millerhoward High Income

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Millerhoward High Income has generated negative risk-adjusted returns adding no value to fund investors. In spite of rather inconsistent forward indicators, Miller/howard High may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Asset High

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Miller/howard High and Western Asset

The main advantage of trading using opposite Miller/howard High and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Miller/howard High 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 Millerhoward High Income and Western Asset High 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.