Correlation Between Westwood Largecap and Sp Smallcap
Can any of the company-specific risk be diversified away by investing in both Westwood Largecap and Sp Smallcap 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 Sp Smallcap 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 Sp Smallcap 600, you can compare the effects of market volatilities on Westwood Largecap and Sp Smallcap 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 Sp Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Largecap and Sp Smallcap.
Diversification Opportunities for Westwood Largecap and Sp Smallcap
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Westwood and RYSVX is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Sp Smallcap 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap 600 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 Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap 600 has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Sp Smallcap go up and down completely randomly.
Pair Corralation between Westwood Largecap and Sp Smallcap
Assuming the 90 days horizon Westwood Largecap is expected to generate 1.62 times less return on investment than Sp Smallcap. But when comparing it to its historical volatility, Westwood Largecap Value is 2.22 times less risky than Sp Smallcap. It trades about 0.07 of its potential returns per unit of risk. Sp Smallcap 600 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 16,169 in Sp Smallcap 600 on September 12, 2024 and sell it today you would earn a total of 5,713 from holding Sp Smallcap 600 or generate 35.33% 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. Sp Smallcap 600
Performance |
| Timeline |
| Westwood Largecap Value |
| Sp Smallcap 600 |
Westwood Largecap and Sp Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Largecap and Sp Smallcap
The main advantage of trading using opposite Westwood Largecap and Sp Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Largecap position performs unexpectedly, Sp Smallcap 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 Sp Smallcap will offset losses from the drop in Sp Smallcap's long position.| Westwood Largecap vs. Sp Smallcap 600 | Westwood Largecap vs. Scout Small Cap | Westwood Largecap vs. Df Dent Small | Westwood Largecap vs. Small Pany Growth |
| Sp Smallcap vs. Vanguard Small Cap Value | Sp Smallcap vs. SCOR PK | Sp Smallcap vs. Morningstar Unconstrained Allocation | Sp Smallcap vs. Thrivent High Yield |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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