Correlation Between Westwood Market and Westwood Largecap
Can any of the company-specific risk be diversified away by investing in both Westwood Market 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 Westwood Market and Westwood Largecap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westwood Market Neutral and Westwood Largecap Value, you can compare the effects of market volatilities on Westwood Market 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 Westwood Market with a short position of Westwood Largecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Market and Westwood Largecap.
Diversification Opportunities for Westwood Market and Westwood Largecap
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westwood and Westwood is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Market Neutral 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 Westwood Market 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 Market Neutral 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 Westwood Market i.e., Westwood Market and Westwood Largecap go up and down completely randomly.
Pair Corralation between Westwood Market and Westwood Largecap
Assuming the 90 days horizon Westwood Market Neutral is expected to generate 0.08 times more return on investment than Westwood Largecap. However, Westwood Market Neutral is 12.66 times less risky than Westwood Largecap. It trades about 0.27 of its potential returns per unit of risk. Westwood Largecap Value is currently generating about -0.02 per unit of risk. If you would invest 961.00 in Westwood Market Neutral on November 1, 2024 and sell it today you would earn a total of 14.00 from holding Westwood Market Neutral or generate 1.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westwood Market Neutral vs. Westwood Largecap Value
Performance |
| Timeline |
| Westwood Market Neutral |
| Westwood Largecap Value |
Westwood Market and Westwood Largecap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Market and Westwood Largecap
The main advantage of trading using opposite Westwood Market and Westwood Largecap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Market 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.| Westwood Market vs. Westwood Short Duration | Westwood Market vs. Westwood Alternative Income | Westwood Market vs. Westwood High Income | Westwood Market vs. Westwood Income Opportunity |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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