Correlation Between Westwood Alternative and Westwood Largecap
Can any of the company-specific risk be diversified away by investing in both Westwood Alternative 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 Alternative 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 Alternative Income and Westwood Largecap Value, you can compare the effects of market volatilities on Westwood Alternative 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 Alternative with a short position of Westwood Largecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Alternative and Westwood Largecap.
Diversification Opportunities for Westwood Alternative and Westwood Largecap
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westwood and Westwood is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Alternative Income 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 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 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 Alternative i.e., Westwood Alternative and Westwood Largecap go up and down completely randomly.
Pair Corralation between Westwood Alternative and Westwood Largecap
Assuming the 90 days horizon Westwood Alternative Income is expected to generate 0.08 times more return on investment than Westwood Largecap. However, Westwood Alternative Income is 12.19 times less risky than Westwood Largecap. It trades about 0.25 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 962.00 in Westwood Alternative Income on November 1, 2024 and sell it today you would earn a total of 13.00 from holding Westwood Alternative Income or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westwood Alternative Income vs. Westwood Largecap Value
Performance |
| Timeline |
| Westwood Alternative |
| Westwood Largecap Value |
Westwood Alternative and Westwood Largecap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Alternative and Westwood Largecap
The main advantage of trading using opposite Westwood Alternative and Westwood Largecap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Alternative 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 Alternative vs. Westwood Short Duration | Westwood Alternative vs. Westwood High Income | Westwood Alternative vs. Westwood Income Opportunity | Westwood Alternative 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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