Correlation Between Western Asset and Rare Global

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

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

Diversification Opportunities for Western Asset and Rare Global

0.74

Correlation Coefficient

Western Asset  Rare Global

Poor diversification

The 3 months correlation between Western and Rare is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset E and Rare Global Infrastructure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rare Global Infrastr 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 E are associated (or correlated) with Rare Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rare Global Infrastr has no effect on the direction of Western Asset i.e., Western Asset and Rare Global go up and down completely randomly.

Pair Corralation between Western Asset and Rare Global

Assuming the 90 days horizon Western Asset is expected to generate 1.45 times less return on investment than Rare Global. But when comparing it to its historical volatility, Western Asset E is 1.93 times less risky than Rare Global. It trades about 0.1 of its potential returns per unit of risk. Rare Global Infrastructure is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,397  in Rare Global Infrastructure on May 6, 2025 and sell it today you would earn a total of  40.00  from holding Rare Global Infrastructure or generate 2.86% return on investment over 90 days.

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

Western Asset E  vs.  Rare Global Infrastructure

Western Asset E

Risk-Adjusted Performance

OK

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

Rare Global Infrastr

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rare Global Infrastructure are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rare Global 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 Rare Global

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

The idea behind Western Asset E and Rare Global Infrastructure 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.