Correlation Between Westwood Largecap and Timothy Small
Can any of the company-specific risk be diversified away by investing in both Westwood Largecap and Timothy Small 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 Westwood Largecap and Timothy Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westwood Largecap Value and Timothy Small Cap Value, you can compare the effects of market volatilities on Westwood Largecap and Timothy Small 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 Westwood Largecap with a short position of Timothy Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Largecap and Timothy Small.
Diversification Opportunities for Westwood Largecap and Timothy Small
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Westwood and Timothy is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Timothy Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Small Cap and Westwood Largecap 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 Westwood Largecap Value are associated (or correlated) with Timothy Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Small Cap has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Timothy Small go up and down completely randomly.
Pair Corralation between Westwood Largecap and Timothy Small
Assuming the 90 days horizon Westwood Largecap is expected to generate 1.35 times less return on investment than Timothy Small. But when comparing it to its historical volatility, Westwood Largecap Value is 1.9 times less risky than Timothy Small. It trades about 0.07 of its potential returns per unit of risk. Timothy Small Cap Value is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,806 in Timothy Small Cap Value on September 12, 2024 and sell it today you would earn a total of 378.00 from holding Timothy Small Cap Value or generate 20.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westwood Largecap Value vs. Timothy Small Cap Value
Performance |
| Timeline |
| Westwood Largecap Value |
| Timothy Small Cap |
Westwood Largecap and Timothy Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Largecap and Timothy Small
The main advantage of trading using opposite Westwood Largecap and Timothy Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Largecap position performs unexpectedly, Timothy Small 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 Timothy Small will offset losses from the drop in Timothy Small's long position.The idea behind Westwood Largecap Value and Timothy Small Cap Value 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.
| Timothy Small vs. Timothy Plan International | Timothy Small vs. Westwood Largecap Value | Timothy Small vs. Advisors Capital Tactical | Timothy Small vs. Value Fund Value |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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