Correlation Between Morningstar International and Old Westbury

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

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

Diversification Opportunities for Morningstar International and Old Westbury

0.84

Correlation Coefficient

Morningstar International  Old Westbury

Very poor diversification

The 3 months correlation between Morningstar and Old is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Morningstar International Equi and Old Westbury Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Fixed and Morningstar International 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 Morningstar International Equity 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 Fixed has no effect on the direction of Morningstar International i.e., Morningstar International and Old Westbury go up and down completely randomly.

Pair Corralation between Morningstar International and Old Westbury

Assuming the 90 days horizon Morningstar International Equity is expected to under-perform the Old Westbury. In addition to that, Morningstar International is 3.1 times more volatile than Old Westbury Fixed. It trades about -0.41 of its total potential returns per unit of risk. Old Westbury Fixed is currently generating about -0.34 per unit of volatility. If you would invest  1,018  in Old Westbury Fixed on October 11, 2024 and sell it today you would lose (21.00) from holding Old Westbury Fixed or give up 2.06% of portfolio value over 90 days.

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

Morningstar International Equi  vs.  Old Westbury Fixed

Morningstar International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morningstar International Equity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Old Westbury Fixed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Old Westbury Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, 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 Morningstar International and Old Westbury

The main advantage of trading using opposite Morningstar International and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Morningstar International 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 Morningstar International Equity and Old Westbury Fixed 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.