Correlation Between Regional Bank and Westwood Largecap
Can any of the company-specific risk be diversified away by investing in both Regional Bank 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 Regional Bank and Westwood Largecap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regional Bank Fund and Westwood Largecap Value, you can compare the effects of market volatilities on Regional Bank 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 Regional Bank with a short position of Westwood Largecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Bank and Westwood Largecap.
Diversification Opportunities for Regional Bank and Westwood Largecap
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Regional and Westwood is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund 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 Regional Bank 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 Regional Bank Fund 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 Regional Bank i.e., Regional Bank and Westwood Largecap go up and down completely randomly.
Pair Corralation between Regional Bank and Westwood Largecap
Assuming the 90 days horizon Regional Bank Fund is expected to generate 1.42 times more return on investment than Westwood Largecap. However, Regional Bank is 1.42 times more volatile than Westwood Largecap Value. It trades about -0.04 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 3,335 in Regional Bank Fund on September 13, 2024 and sell it today you would lose (26.00) from holding Regional Bank Fund or give up 0.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regional Bank Fund vs. Westwood Largecap Value
Performance |
| Timeline |
| Regional Bank |
| Westwood Largecap Value |
Regional Bank and Westwood Largecap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regional Bank and Westwood Largecap
The main advantage of trading using opposite Regional Bank and Westwood Largecap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Bank 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.| Regional Bank vs. Putnam Convertible Incm Gwth | Regional Bank vs. Lord Abbett Convertible | Regional Bank vs. Allianzgi Convertible Income | Regional Bank vs. Calamos Dynamic Convertible |
| Westwood Largecap vs. Pnc Emerging Markets | Westwood Largecap vs. Shelton Emerging Markets | Westwood Largecap vs. Locorr Market Trend | Westwood Largecap vs. Rbc Emerging Markets |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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