Correlation Between Westwood Largecap and Litman Gregory
Can any of the company-specific risk be diversified away by investing in both Westwood Largecap and Litman Gregory 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 Litman Gregory 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 Litman Gregory Masters, you can compare the effects of market volatilities on Westwood Largecap and Litman Gregory 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 Litman Gregory. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Largecap and Litman Gregory.
Diversification Opportunities for Westwood Largecap and Litman Gregory
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Westwood and Litman is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Litman Gregory Masters in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Masters 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Masters has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Litman Gregory go up and down completely randomly.
Pair Corralation between Westwood Largecap and Litman Gregory
Assuming the 90 days horizon Westwood Largecap Value is expected to generate 7.46 times more return on investment than Litman Gregory. However, Westwood Largecap is 7.46 times more volatile than Litman Gregory Masters. It trades about 0.32 of its potential returns per unit of risk. Litman Gregory Masters is currently generating about 0.26 per unit of risk. If you would invest 1,465 in Westwood Largecap Value on September 3, 2024 and sell it today you would earn a total of 85.00 from holding Westwood Largecap Value or generate 5.8% 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. Litman Gregory Masters
Performance |
| Timeline |
| Westwood Largecap Value |
| Litman Gregory Masters |
Westwood Largecap and Litman Gregory Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Largecap and Litman Gregory
The main advantage of trading using opposite Westwood Largecap and Litman Gregory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Largecap position performs unexpectedly, Litman Gregory 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 Litman Gregory will offset losses from the drop in Litman Gregory's long position.| Westwood Largecap vs. Ab Bond Inflation | Westwood Largecap vs. Arrow Managed Futures | Westwood Largecap vs. Lord Abbett Inflation | Westwood Largecap vs. Guidepath Managed Futures |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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