Correlation Between Russell 2000 and Westwood Largecap
Can any of the company-specific risk be diversified away by investing in both Russell 2000 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 Russell 2000 and Westwood Largecap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Russell 2000 2x and Westwood Largecap Value, you can compare the effects of market volatilities on Russell 2000 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 Russell 2000 with a short position of Westwood Largecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Westwood Largecap.
Diversification Opportunities for Russell 2000 and Westwood Largecap
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Russell and Westwood is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 2x 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 Russell 2000 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 Russell 2000 2x 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 Russell 2000 i.e., Russell 2000 and Westwood Largecap go up and down completely randomly.
Pair Corralation between Russell 2000 and Westwood Largecap
Assuming the 90 days horizon Russell 2000 2x is expected to generate 3.76 times more return on investment than Westwood Largecap. However, Russell 2000 is 3.76 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 0.06 per unit of risk. If you would invest 13,401 in Russell 2000 2x on September 3, 2024 and sell it today you would earn a total of 6,771 from holding Russell 2000 2x or generate 50.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Russell 2000 2x vs. Westwood Largecap Value
Performance |
| Timeline |
| Russell 2000 2x |
| Westwood Largecap Value |
Russell 2000 and Westwood Largecap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Russell 2000 and Westwood Largecap
The main advantage of trading using opposite Russell 2000 and Westwood Largecap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 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.| Russell 2000 vs. William Blair Growth | Russell 2000 vs. Artisan Small Cap | Russell 2000 vs. Mid Cap Growth | Russell 2000 vs. Pace Smallmedium Growth |
| Westwood Largecap vs. Ab Bond Inflation | Westwood Largecap vs. Arrow Managed Futures | Westwood Largecap vs. Lord Abbett Inflation | Westwood Largecap vs. Guidepath Managed Futures |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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