Correlation Between Technology Telecommunicatio and Westwood Holdings
Can any of the company-specific risk be diversified away by investing in both Technology Telecommunicatio and Westwood Holdings 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 Technology Telecommunicatio and Westwood Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Telecommunication Acquisition and Westwood Holdings Group, you can compare the effects of market volatilities on Technology Telecommunicatio and Westwood Holdings 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 Technology Telecommunicatio with a short position of Westwood Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Telecommunicatio and Westwood Holdings.
Diversification Opportunities for Technology Telecommunicatio and Westwood Holdings
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Technology and Westwood is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Technology Telecommunication A and Westwood Holdings Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Holdings and Technology Telecommunicatio 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 Technology Telecommunication Acquisition are associated (or correlated) with Westwood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Holdings has no effect on the direction of Technology Telecommunicatio i.e., Technology Telecommunicatio and Westwood Holdings go up and down completely randomly.
Pair Corralation between Technology Telecommunicatio and Westwood Holdings
Assuming the 90 days horizon Technology Telecommunication Acquisition is expected to generate 108.54 times more return on investment than Westwood Holdings. However, Technology Telecommunicatio is 108.54 times more volatile than Westwood Holdings Group. It trades about 0.24 of its potential returns per unit of risk. Westwood Holdings Group is currently generating about 0.08 per unit of risk. If you would invest 2.53 in Technology Telecommunication Acquisition on September 2, 2024 and sell it today you would lose (1.21) from holding Technology Telecommunication Acquisition or give up 47.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 39.52% |
| Values | Daily Returns |
Technology Telecommunication A vs. Westwood Holdings Group
Performance |
| Timeline |
| Technology Telecommunicatio |
| Westwood Holdings |
Technology Telecommunicatio and Westwood Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Telecommunicatio and Westwood Holdings
The main advantage of trading using opposite Technology Telecommunicatio and Westwood Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Telecommunicatio position performs unexpectedly, Westwood Holdings 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 Holdings will offset losses from the drop in Westwood Holdings' long position.The idea behind Technology Telecommunication Acquisition and Westwood Holdings Group 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.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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