Correlation Between Pace Small/medium and Old Westbury

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

By analyzing existing cross correlation between Pace Smallmedium Value and Old Westbury Small, you can compare the effects of market volatilities on Pace Small/medium 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 Pace Small/medium with a short position of Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pace Small/medium and Old Westbury.

Diversification Opportunities for Pace Small/medium and Old Westbury

0.89

Correlation Coefficient

Pace Small/medium  Old Westbury

Very poor diversification

The 3 months correlation between Pace and Old is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Pace Smallmedium Value and Old Westbury Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Small and Pace Small/medium 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 Pace Smallmedium Value 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 Small has no effect on the direction of Pace Small/medium i.e., Pace Small/medium and Old Westbury go up and down completely randomly.

Pair Corralation between Pace Small/medium and Old Westbury

Assuming the 90 days horizon Pace Smallmedium Value is expected to under-perform the Old Westbury. In addition to that, Pace Small/medium is 1.79 times more volatile than Old Westbury Small. It trades about -0.03 of its total potential returns per unit of risk. Old Westbury Small is currently generating about 0.01 per unit of volatility. If you would invest  1,583  in Old Westbury Small on December 2, 2024 and sell it today you would earn a total of  31.00  from holding Old Westbury Small or generate 1.96% return on investment over 90 days.

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

Pace Smallmedium Value  vs.  Old Westbury Small

Pace Smallmedium Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pace Smallmedium Value 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.

Old Westbury Small

Risk-Adjusted Performance

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 latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Pace Small/medium and Old Westbury

The main advantage of trading using opposite Pace Small/medium and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pace Small/medium 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 Pace Smallmedium Value and Old Westbury Small 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.