Correlation Between Westwood Largecap and Power Momentum
Can any of the company-specific risk be diversified away by investing in both Westwood Largecap and Power Momentum 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 Power Momentum 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 Power Momentum Index, you can compare the effects of market volatilities on Westwood Largecap and Power Momentum 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 Power Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Largecap and Power Momentum.
Diversification Opportunities for Westwood Largecap and Power Momentum
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Westwood and Power is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Power Momentum Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Momentum Index 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 Power Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Momentum Index has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Power Momentum go up and down completely randomly.
Pair Corralation between Westwood Largecap and Power Momentum
Assuming the 90 days horizon Westwood Largecap Value is expected to generate 0.62 times more return on investment than Power Momentum. However, Westwood Largecap Value is 1.63 times less risky than Power Momentum. It trades about 0.13 of its potential returns per unit of risk. Power Momentum Index is currently generating about 0.08 per unit of risk. If you would invest 1,391 in Westwood Largecap Value on September 2, 2024 and sell it today you would earn a total of 159.00 from holding Westwood Largecap Value or generate 11.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westwood Largecap Value vs. Power Momentum Index
Performance |
| Timeline |
| Westwood Largecap Value |
| Power Momentum Index |
Westwood Largecap and Power Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Largecap and Power Momentum
The main advantage of trading using opposite Westwood Largecap and Power Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Largecap position performs unexpectedly, Power Momentum 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 Power Momentum will offset losses from the drop in Power Momentum's long position.| Westwood Largecap vs. Ultra Short Fixed Income | Westwood Largecap vs. Ms Global Fixed | Westwood Largecap vs. Multimedia Portfolio Multimedia | Westwood Largecap vs. Huber Capital Equity |
| Power Momentum vs. Power Income Fund | Power Momentum vs. Power Income Fund | Power Momentum vs. Power Income Fund | Power Momentum vs. Power Momentum Index |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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