Correlation Between Westwood Quality and Westwood Largecap
Can any of the company-specific risk be diversified away by investing in both Westwood Quality 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 Quality 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 Quality Value and Westwood Largecap Value, you can compare the effects of market volatilities on Westwood Quality 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 Quality with a short position of Westwood Largecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Quality and Westwood Largecap.
Diversification Opportunities for Westwood Quality and Westwood Largecap
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Westwood and Westwood is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Quality Value 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 Quality 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 Quality Value 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 Quality i.e., Westwood Quality and Westwood Largecap go up and down completely randomly.
Pair Corralation between Westwood Quality and Westwood Largecap
Assuming the 90 days horizon Westwood Quality is expected to generate 1.03 times less return on investment than Westwood Largecap. In addition to that, Westwood Quality is 1.01 times more volatile than Westwood Largecap Value. It trades about 0.12 of its total potential returns per unit of risk. Westwood Largecap Value is currently generating about 0.13 per unit of volatility. If you would invest 1,467 in Westwood Largecap Value on August 28, 2024 and sell it today you would earn a total of 84.00 from holding Westwood Largecap Value or generate 5.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Westwood Quality Value vs. Westwood Largecap Value
Performance |
| Timeline |
| Westwood Quality Value |
| Westwood Largecap Value |
Westwood Quality and Westwood Largecap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Westwood Quality and Westwood Largecap
The main advantage of trading using opposite Westwood Quality and Westwood Largecap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Quality 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 Quality vs. Westwood Short Duration | Westwood Quality vs. Westwood Alternative Income | Westwood Quality vs. Westwood High Income | Westwood Quality vs. Westwood Income Opportunity |
| Westwood Largecap vs. Westwood Short Duration | Westwood Largecap vs. Westwood Alternative Income | Westwood Largecap vs. Westwood High Income | Westwood Largecap vs. Westwood Income Opportunity |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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