Correlation Between Akre Focus and Teton Westwood

Can any of the company-specific risk be diversified away by investing in both Akre Focus and Teton Westwood 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 Akre Focus and Teton Westwood into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Akre Focus Fund and Teton Westwood Mighty, you can compare the effects of market volatilities on Akre Focus and Teton Westwood 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 Akre Focus with a short position of Teton Westwood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akre Focus and Teton Westwood.

Diversification Opportunities for Akre Focus and Teton Westwood

0.8

Correlation Coefficient

Akre Focus  Teton Westwood

Very poor diversification

The 3 months correlation between Akre and Teton is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Akre Focus Fund and Teton Westwood Mighty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teton Westwood Mighty and Akre Focus 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 Akre Focus Fund are associated (or correlated) with Teton Westwood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teton Westwood Mighty has no effect on the direction of Akre Focus i.e., Akre Focus and Teton Westwood go up and down completely randomly.

Pair Corralation between Akre Focus and Teton Westwood

Assuming the 90 days horizon Akre Focus Fund is expected to generate 0.53 times more return on investment than Teton Westwood. However, Akre Focus Fund is 1.88 times less risky than Teton Westwood. It trades about 0.07 of its potential returns per unit of risk. Teton Westwood Mighty is currently generating about -0.03 per unit of risk. If you would invest  5,176  in Akre Focus Fund on October 26, 2024 and sell it today you would earn a total of  1,869  from holding Akre Focus Fund or generate 36.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Akre Focus Fund  vs.  Teton Westwood Mighty

Akre Focus Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Akre Focus Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Akre Focus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Teton Westwood Mighty

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Teton Westwood Mighty are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Teton Westwood is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Akre Focus and Teton Westwood

The main advantage of trading using opposite Akre Focus and Teton Westwood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akre Focus position performs unexpectedly, Teton Westwood 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 Teton Westwood will offset losses from the drop in Teton Westwood's long position.

The idea behind Akre Focus Fund and Teton Westwood Mighty pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.