Correlation Between Old Westbury and Small Cap
Can any of the company-specific risk be diversified away by investing in both Old Westbury and Small Cap 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 Old Westbury and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Old Westbury Short Term and Small Cap Stock, you can compare the effects of market volatilities on Old Westbury and Small Cap 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 Old Westbury with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Westbury and Small Cap.
Diversification Opportunities for Old Westbury and Small Cap
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Old and Small is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Short Term and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Old Westbury 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 Old Westbury Short Term are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Stock has no effect on the direction of Old Westbury i.e., Old Westbury and Small Cap go up and down completely randomly.
Pair Corralation between Old Westbury and Small Cap
Assuming the 90 days horizon Old Westbury Short Term is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Old Westbury Short Term is 18.03 times less risky than Small Cap. The mutual fund trades about -0.05 of its potential returns per unit of risk. The Small Cap Stock is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,400 in Small Cap Stock on August 24, 2024 and sell it today you would earn a total of 61.00 from holding Small Cap Stock or generate 4.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Old Westbury Short Term vs. Small Cap Stock
Performance |
| Timeline |
| Old Westbury Short |
| Small Cap Stock |
Old Westbury and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Old Westbury and Small Cap
The main advantage of trading using opposite Old Westbury and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Westbury position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.The idea behind Old Westbury Short Term and Small Cap Stock pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index | Small Cap vs. Vanguard Small Cap Index |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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