Correlation Between Large Cap and Old Westbury
Can any of the company-specific risk be diversified away by investing in both Large 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 Large 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 Large Cap E and Old Westbury Fixed, you can compare the effects of market volatilities on Large 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 Large Cap with a short position of Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Large Cap and Old Westbury.
Diversification Opportunities for Large Cap and Old Westbury
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Large and Old is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Large Cap E and Old Westbury Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Fixed and Large 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 Large Cap E 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 Fixed has no effect on the direction of Large Cap i.e., Large Cap and Old Westbury go up and down completely randomly.
Pair Corralation between Large Cap and Old Westbury
Assuming the 90 days horizon Large Cap E is expected to under-perform the Old Westbury. In addition to that, Large Cap is 5.63 times more volatile than Old Westbury Fixed. It trades about -0.01 of its total potential returns per unit of risk. Old Westbury Fixed is currently generating about 0.04 per unit of volatility. If you would invest 973.00 in Old Westbury Fixed on October 18, 2024 and sell it today you would earn a total of 25.00 from holding Old Westbury Fixed or generate 2.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Large Cap E vs. Old Westbury Fixed
Performance |
| Timeline |
| Large Cap E |
| Old Westbury Fixed |
Large Cap and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Large Cap and Old Westbury
The main advantage of trading using opposite Large Cap and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Large 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.| Large Cap vs. Old Westbury Fixed | Large Cap vs. Locorr Dynamic Equity | Large Cap vs. Smallcap World Fund | Large Cap vs. Aqr Long Short Equity |
| Old Westbury vs. Pace International Equity | Old Westbury vs. Morningstar International Equity | Old Westbury vs. Guidemark E Fixed | Old Westbury vs. Franklin Equity Income |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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