Correlation Between Small Cap and Westwood Largecap
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Westwood Largecap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Westwood Largecap Value, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Westwood Largecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Westwood Largecap.
Diversification Opportunities for Small Cap and Westwood Largecap
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and Westwood is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock 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 Small 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 Small Cap Stock 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 Small Cap i.e., Small Cap and Westwood Largecap go up and down completely randomly.
Pair Corralation between Small Cap and Westwood Largecap
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.46 times more return on investment than Westwood Largecap. However, Small Cap is 1.46 times more volatile than Westwood Largecap Value. It trades about 0.13 of its potential returns per unit of risk. Westwood Largecap Value is currently generating about 0.18 per unit of risk. If you would invest 1,327 in Small Cap Stock on October 22, 2024 and sell it today you would earn a total of 29.00 from holding Small Cap Stock or generate 2.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Westwood Largecap Value
Performance |
| Timeline |
| Small Cap Stock |
| Westwood Largecap Value |
Small Cap and Westwood Largecap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Westwood Largecap
The main advantage of trading using opposite Small Cap and Westwood Largecap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. Vanguard Energy Index | Small Cap vs. Oil Gas Ultrasector | Small Cap vs. World Energy Fund | Small Cap vs. Thrivent Natural Resources |
| Westwood Largecap vs. Issachar Fund Class | Westwood Largecap vs. Victory Incore Fund | Westwood Largecap vs. Rbb Fund | Westwood Largecap vs. T Rowe Price |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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