Correlation Between Old Westbury and Scout Small

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

By analyzing existing cross correlation between Old Westbury Small and Scout Small Cap, you can compare the effects of market volatilities on Old Westbury and Scout Small 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 Scout Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Westbury and Scout Small.

Diversification Opportunities for Old Westbury and Scout Small

0.78

Correlation Coefficient

Old Westbury  Scout Small

Poor diversification

The 3 months correlation between Old and Scout is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Small and Scout Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scout Small Cap 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 Small are associated (or correlated) with Scout Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scout Small Cap has no effect on the direction of Old Westbury i.e., Old Westbury and Scout Small go up and down completely randomly.

Pair Corralation between Old Westbury and Scout Small

Assuming the 90 days horizon Old Westbury Small is expected to generate 0.44 times more return on investment than Scout Small. However, Old Westbury Small is 2.3 times less risky than Scout Small. It trades about -0.38 of its potential returns per unit of risk. Scout Small Cap is currently generating about -0.29 per unit of risk. If you would invest  1,753  in Old Westbury Small on October 7, 2024 and sell it today you would lose (144.00) from holding Old Westbury Small or give up 8.21% of portfolio value over 90 days.

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

Old Westbury Small  vs.  Scout Small Cap

Old Westbury Small

Risk-Adjusted Performance

0 of 100

Very Weak

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

Scout Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scout Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical indicators, Scout Small 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 Scout Small

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

The idea behind Old Westbury Small and Scout Small Cap 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.