Correlation Between Value Fund and Old Westbury

Can any of the company-specific risk be diversified away by investing in both Value Fund and Old Westbury 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 Value Fund and Old Westbury into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Value Fund R and Old Westbury Municipal, you can compare the effects of market volatilities on Value Fund and Old Westbury 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 Value Fund with a short position of Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Old Westbury.

Diversification Opportunities for Value Fund and Old Westbury

0.71

Correlation Coefficient

Value Fund  Old Westbury

Poor diversification

The 3 months correlation between Value and Old is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund R and Old Westbury Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Municipal and Value Fund 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 Value Fund R are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Municipal has no effect on the direction of Value Fund i.e., Value Fund and Old Westbury go up and down completely randomly.

Pair Corralation between Value Fund and Old Westbury

Assuming the 90 days horizon Value Fund R is expected to generate 4.56 times more return on investment than Old Westbury. However, Value Fund is 4.56 times more volatile than Old Westbury Municipal. It trades about 0.09 of its potential returns per unit of risk. Old Westbury Municipal is currently generating about 0.01 per unit of risk. If you would invest  772.00  in Value Fund R on December 27, 2024 and sell it today you would earn a total of  28.00  from holding Value Fund R or generate 3.63% return on investment over 90 days.

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

Value Fund R  vs.  Old Westbury Municipal

Value Fund R

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund R are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Value Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Old Westbury Municipal

Risk-Adjusted Performance

Weak

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

Pair Trading with Value Fund and Old Westbury

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

The idea behind Value Fund R and Old Westbury Municipal 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.