Correlation Between Western Asset and Taiwan Closed

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

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

Diversification Opportunities for Western Asset and Taiwan Closed

-0.16

Correlation Coefficient

Western Asset  Taiwan Closed

Good diversification

The 3 months correlation between Western and Taiwan is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset Managed and Taiwan Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Closed 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 Managed are associated (or correlated) with Taiwan Closed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Closed has no effect on the direction of Western Asset i.e., Western Asset and Taiwan Closed go up and down completely randomly.

Pair Corralation between Western Asset and Taiwan Closed

Considering the 90-day investment horizon Western Asset Managed is expected to under-perform the Taiwan Closed. But the fund apears to be less risky and, when comparing its historical volatility, Western Asset Managed is 1.57 times less risky than Taiwan Closed. The fund trades about -0.27 of its potential returns per unit of risk. The Taiwan Closed is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  4,262  in Taiwan Closed on September 24, 2024 and sell it today you would earn a total of  431.00  from holding Taiwan Closed or generate 10.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Western Asset Managed  vs.  Taiwan Closed

Western Asset Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable primary indicators, Western Asset is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Taiwan Closed

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Closed are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of very healthy basic indicators, Taiwan Closed is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Western Asset and Taiwan Closed

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

The idea behind Western Asset Managed and Taiwan Closed 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.