Correlation Between Small Cap and Old Westbury
Can any of the company-specific risk be diversified away by investing in both Small Cap and Old Westbury 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 Small Cap and Old Westbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Old Westbury Credit, you can compare the effects of market volatilities on Small Cap and Old Westbury 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 Small Cap with a short position of Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Old Westbury.
Diversification Opportunities for Small Cap and Old Westbury
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Old is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Old Westbury Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Credit and Small Cap 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 Small Cap Value are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Credit has no effect on the direction of Small Cap i.e., Small Cap and Old Westbury go up and down completely randomly.
Pair Corralation between Small Cap and Old Westbury
Assuming the 90 days horizon Small Cap Value is expected to under-perform the Old Westbury. In addition to that, Small Cap is 2.44 times more volatile than Old Westbury Credit. It trades about -0.05 of its total potential returns per unit of risk. Old Westbury Credit is currently generating about 0.16 per unit of volatility. If you would invest 807.00 in Old Westbury Credit on September 12, 2024 and sell it today you would earn a total of 9.00 from holding Old Westbury Credit or generate 1.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Old Westbury Credit
Performance |
| Timeline |
| Small Cap Value |
| Old Westbury Credit |
Small Cap and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Old Westbury
The main advantage of trading using opposite Small Cap and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Old Westbury 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 Old Westbury will offset losses from the drop in Old Westbury's long position.| Small Cap vs. Cmg Ultra Short | Small Cap vs. Prudential Short Duration | Small Cap vs. Easterly Snow Longshort | Small Cap vs. Aqr Long Short Equity |
| Old Westbury vs. Oaktree Diversifiedome | Old Westbury vs. Sentinel Small Pany | Old Westbury vs. Huber Capital Diversified | Old Westbury vs. Pioneer Diversified High |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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