Correlation Between Western Asset and Miller/howard High

Can any of the company-specific risk be diversified away by investing in both Western Asset and Miller/howard High 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 Miller/howard High 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 Millerhoward High Income, you can compare the effects of market volatilities on Western Asset and Miller/howard High 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 Miller/howard High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and Miller/howard High.

Diversification Opportunities for Western Asset and Miller/howard High

0.74

Correlation Coefficient

Western Asset  Miller/howard High

Poor diversification

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

Pair Corralation between Western Asset and Miller/howard High

Considering the 90-day investment horizon Western Asset Mortgage is expected to under-perform the Miller/howard High. But the fund apears to be less risky and, when comparing its historical volatility, Western Asset Mortgage is 1.07 times less risky than Miller/howard High. The fund trades about 0.0 of its potential returns per unit of risk. The Millerhoward High Income is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,227  in Millerhoward High Income on August 24, 2024 and sell it today you would earn a total of  29.00  from holding Millerhoward High Income or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Western Asset Mortgage  vs.  Millerhoward High Income

Western Asset Mortgage

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Mortgage are ranked lower than 6 (%) 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.

Millerhoward High Income

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Millerhoward High Income are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. 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 December 2024.

Pair Trading with Western Asset and Miller/howard High

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

The idea behind Western Asset Mortgage and Millerhoward High Income 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..