Correlation Between Chase Growth and Westwood Quality

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

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

Diversification Opportunities for Chase Growth and Westwood Quality

0.86

Correlation Coefficient

Chase Growth  Westwood Quality

Very poor diversification

The 3 months correlation between Chase and Westwood is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Chase Growth Fund and Westwood Quality Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Quality Smallcap and Chase Growth 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 Chase Growth Fund are associated (or correlated) with Westwood Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Quality Smallcap has no effect on the direction of Chase Growth i.e., Chase Growth and Westwood Quality go up and down completely randomly.

Pair Corralation between Chase Growth and Westwood Quality

Assuming the 90 days horizon Chase Growth Fund is expected to generate 0.62 times more return on investment than Westwood Quality. However, Chase Growth Fund is 1.61 times less risky than Westwood Quality. It trades about 0.25 of its potential returns per unit of risk. Westwood Quality Smallcap is currently generating about 0.11 per unit of risk. If you would invest  1,564  in Chase Growth Fund on September 12, 2024 and sell it today you would earn a total of  204.00  from holding Chase Growth Fund or generate 13.04% return on investment over 90 days.

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

Chase Growth Fund  vs.  Westwood Quality Smallcap

Chase Growth

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chase Growth Fund are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Chase Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Westwood Quality Smallcap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood Quality Smallcap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Westwood Quality may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Chase Growth and Westwood Quality

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

The idea behind Chase Growth Fund and Westwood Quality Smallcap 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 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.