Correlation Between Vaughan Nelson and Westwood Largecap
Can any of the company-specific risk be diversified away by investing in both Vaughan Nelson and Westwood Largecap 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 Vaughan Nelson and Westwood Largecap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vaughan Nelson International and Westwood Largecap Value, you can compare the effects of market volatilities on Vaughan Nelson and Westwood Largecap 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 Vaughan Nelson with a short position of Westwood Largecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vaughan Nelson and Westwood Largecap.
Diversification Opportunities for Vaughan Nelson and Westwood Largecap
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vaughan and Westwood is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vaughan Nelson International and Westwood Largecap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Largecap Value and Vaughan Nelson 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 Vaughan Nelson International are associated (or correlated) with Westwood Largecap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Largecap Value has no effect on the direction of Vaughan Nelson i.e., Vaughan Nelson and Westwood Largecap go up and down completely randomly.
Pair Corralation between Vaughan Nelson and Westwood Largecap
Assuming the 90 days horizon Vaughan Nelson International is expected to generate 1.47 times more return on investment than Westwood Largecap. However, Vaughan Nelson is 1.47 times more volatile than Westwood Largecap Value. It trades about 0.1 of its potential returns per unit of risk. Westwood Largecap Value is currently generating about -0.09 per unit of risk. If you would invest 1,401 in Vaughan Nelson International on September 13, 2024 and sell it today you would earn a total of 23.00 from holding Vaughan Nelson International or generate 1.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vaughan Nelson International vs. Westwood Largecap Value
Performance |
| Timeline |
| Vaughan Nelson Inter |
| Westwood Largecap Value |
Vaughan Nelson and Westwood Largecap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vaughan Nelson and Westwood Largecap
The main advantage of trading using opposite Vaughan Nelson and Westwood Largecap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vaughan Nelson position performs unexpectedly, Westwood Largecap 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 Westwood Largecap will offset losses from the drop in Westwood Largecap's long position.| Vaughan Nelson vs. Needham Aggressive Growth | Vaughan Nelson vs. Ab Global Risk | Vaughan Nelson vs. Us High Relative | Vaughan Nelson vs. Artisan High Income |
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Check out your portfolio center.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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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