Correlation Between Berwyn Income and Westwood Income

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

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

Diversification Opportunities for Berwyn Income and Westwood Income

0.83

Correlation Coefficient

Berwyn Income  Westwood Income

Very poor diversification

The 3 months correlation between Berwyn and Westwood is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Berwyn Income Fund and Westwood Income Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Income Oppo and Berwyn Income 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 Berwyn Income Fund are associated (or correlated) with Westwood Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Income Oppo has no effect on the direction of Berwyn Income i.e., Berwyn Income and Westwood Income go up and down completely randomly.

Pair Corralation between Berwyn Income and Westwood Income

Assuming the 90 days horizon Berwyn Income is expected to generate 1.19 times less return on investment than Westwood Income. But when comparing it to its historical volatility, Berwyn Income Fund is 1.86 times less risky than Westwood Income. It trades about 0.26 of its potential returns per unit of risk. Westwood Income Opportunity is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,199  in Westwood Income Opportunity on October 26, 2024 and sell it today you would earn a total of  17.00  from holding Westwood Income Opportunity or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

Berwyn Income Fund  vs.  Westwood Income Opportunity

Berwyn Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Berwyn Income Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Berwyn Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Westwood Income Oppo

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood Income Opportunity are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Westwood Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Berwyn Income and Westwood Income

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

The idea behind Berwyn Income Fund and Westwood Income Opportunity 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.