Correlation Between Old Westbury and Parametric International

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

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

Diversification Opportunities for Old Westbury and Parametric International

0.58

Correlation Coefficient

Old Westbury  Parametric International

Very weak diversification

The 3 months correlation between Old and Parametric is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Short Term and Parametric International Equit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parametric International and Old Westbury 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 Old Westbury Short Term are associated (or correlated) with Parametric International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parametric International has no effect on the direction of Old Westbury i.e., Old Westbury and Parametric International go up and down completely randomly.

Pair Corralation between Old Westbury and Parametric International

Assuming the 90 days horizon Old Westbury Short Term is expected to generate 0.15 times more return on investment than Parametric International. However, Old Westbury Short Term is 6.71 times less risky than Parametric International. It trades about -0.03 of its potential returns per unit of risk. Parametric International Equity is currently generating about -0.12 per unit of risk. If you would invest  1,020  in Old Westbury Short Term on September 16, 2024 and sell it today you would lose (2.00) from holding Old Westbury Short Term or give up 0.2% of portfolio value over 90 days.

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

Old Westbury Short Term  vs.  Parametric International Equit

Old Westbury Short

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Old Westbury Short Term has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Old Westbury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parametric International

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Old Westbury and Parametric International

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

The idea behind Old Westbury Short Term and Parametric International Equity 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..