Correlation Between Smallcap World and Old Westbury
Can any of the company-specific risk be diversified away by investing in both Smallcap World 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 Smallcap World and Old Westbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Old Westbury Small, you can compare the effects of market volatilities on Smallcap World 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 Smallcap World with a short position of Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Old Westbury.
Diversification Opportunities for Smallcap World and Old Westbury
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Smallcap and Old is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Old Westbury Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Small and Smallcap World 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 Smallcap World Fund 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 Small has no effect on the direction of Smallcap World i.e., Smallcap World and Old Westbury go up and down completely randomly.
Pair Corralation between Smallcap World and Old Westbury
Assuming the 90 days horizon Smallcap World is expected to generate 1.14 times less return on investment than Old Westbury. In addition to that, Smallcap World is 1.14 times more volatile than Old Westbury Small. It trades about 0.04 of its total potential returns per unit of risk. Old Westbury Small is currently generating about 0.05 per unit of volatility. If you would invest 1,708 in Old Westbury Small on August 28, 2024 and sell it today you would earn a total of 25.00 from holding Old Westbury Small or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Old Westbury Small
Performance |
| Timeline |
| Smallcap World |
| Old Westbury Small |
Smallcap World and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Old Westbury
The main advantage of trading using opposite Smallcap World and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World 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.| Smallcap World vs. Income Fund Of | Smallcap World vs. New World Fund | Smallcap World vs. American Mutual Fund | Smallcap World vs. American Mutual Fund |
| Old Westbury vs. Aqr Large Cap | Old Westbury vs. Tax Managed Large Cap | Old Westbury vs. Touchstone Large Cap | Old Westbury vs. Federated Mdt Large |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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