Correlation Between James Balanced and Westwood Income

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

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

Diversification Opportunities for James Balanced and Westwood Income

0.81

Correlation Coefficient

James Balanced  Westwood Income

Very poor diversification

The 3 months correlation between James and Westwood is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding James Balanced Golden 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 James Balanced 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 James Balanced Golden 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 James Balanced i.e., James Balanced and Westwood Income go up and down completely randomly.

Pair Corralation between James Balanced and Westwood Income

Assuming the 90 days horizon James Balanced Golden is expected to under-perform the Westwood Income. In addition to that, James Balanced is 1.14 times more volatile than Westwood Income Opportunity. It trades about -0.03 of its total potential returns per unit of risk. Westwood Income Opportunity is currently generating about 0.02 per unit of volatility. If you would invest  1,191  in Westwood Income Opportunity on December 20, 2024 and sell it today you would earn a total of  7.00  from holding Westwood Income Opportunity or generate 0.59% return on investment over 90 days.

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

James Balanced Golden  vs.  Westwood Income Opportunity

James Balanced Golden

Risk-Adjusted Performance

Very Weak

Over the last 90 days James Balanced Golden has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, James Balanced 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

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood Income Opportunity are ranked lower than 1 (%) 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 James Balanced and Westwood Income

The main advantage of trading using opposite James Balanced and Westwood Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James Balanced 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 James Balanced Golden 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.

Check out your portfolio center.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.