Correlation Between First American and Westwood Quality

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

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

Diversification Opportunities for First American and Westwood Quality

0.0

Correlation Coefficient

First American  Westwood Quality

Pay attention - limited upside

The 3 months correlation between First and Westwood is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First American Funds 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 First American 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 First American Funds 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 First American i.e., First American and Westwood Quality go up and down completely randomly.

Pair Corralation between First American and Westwood Quality

If you would invest  100.00  in First American Funds on December 2, 2024 and sell it today you would earn a total of  0.00  from holding First American Funds or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First American Funds  vs.  Westwood Quality Smallcap

First American Funds

Risk-Adjusted Performance

Very Weak

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

Westwood Quality Smallcap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westwood Quality Smallcap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with First American and Westwood Quality

The main advantage of trading using opposite First American and Westwood Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American 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 First American Funds 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.