Correlation Between Westwood Alternative and Westwood Quality
Can any of the company-specific risk be diversified away by investing in both Westwood Alternative and Westwood Quality 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 Alternative and Westwood Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westwood Alternative Income and Westwood Quality Value, you can compare the effects of market volatilities on Westwood Alternative and Westwood Quality 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 Alternative with a short position of Westwood Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Alternative and Westwood Quality.
Diversification Opportunities for Westwood Alternative and Westwood Quality
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westwood and Westwood is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Alternative Income and Westwood Quality Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Quality Value and Westwood Alternative 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 Alternative Income are associated (or correlated) with Westwood Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Quality Value has no effect on the direction of Westwood Alternative i.e., Westwood Alternative and Westwood Quality go up and down completely randomly.
Pair Corralation between Westwood Alternative and Westwood Quality
Assuming the 90 days horizon Westwood Alternative is expected to generate 3.95 times less return on investment than Westwood Quality. But when comparing it to its historical volatility, Westwood Alternative Income is 2.84 times less risky than Westwood Quality. It trades about 0.4 of its potential returns per unit of risk. Westwood Quality Value is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 1,380 in Westwood Quality Value on November 9, 2024 and sell it today you would earn a total of 9.00 from holding Westwood Quality Value or generate 0.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 20.0% |
| Values | Daily Returns |
Westwood Alternative Income vs. Westwood Quality Value
Performance |
| Timeline |
| Westwood Alternative |
| Westwood Quality Value |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Westwood Alternative and Westwood Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Alternative and Westwood Quality
The main advantage of trading using opposite Westwood Alternative and Westwood Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Alternative position performs unexpectedly, Westwood Quality 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 Quality will offset losses from the drop in Westwood Quality's long position.| Westwood Alternative vs. Oppenheimer Gold Special | Westwood Alternative vs. Great West Goldman Sachs | Westwood Alternative vs. Deutsche Gold Precious | Westwood Alternative vs. Fidelity Advisor Gold |
| Westwood Quality vs. Tax Managed Large Cap | Westwood Quality vs. Calvert Large Cap | Westwood Quality vs. Fisher Large Cap | Westwood Quality vs. Dodge Cox Stock |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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