Correlation Between Plumb Balanced and Wesmark Small

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

By analyzing existing cross correlation between Plumb Balanced Fund and Wesmark Small Pany, you can compare the effects of market volatilities on Plumb Balanced and Wesmark 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 Plumb Balanced with a short position of Wesmark Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plumb Balanced and Wesmark Small.

Diversification Opportunities for Plumb Balanced and Wesmark Small

0.74

Correlation Coefficient

Plumb Balanced  Wesmark Small

Poor diversification

The 3 months correlation between Plumb and Wesmark is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Plumb Balanced Fund and Wesmark Small Pany in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesmark Small Pany and Plumb 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 Plumb Balanced Fund are associated (or correlated) with Wesmark Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesmark Small Pany has no effect on the direction of Plumb Balanced i.e., Plumb Balanced and Wesmark Small go up and down completely randomly.

Pair Corralation between Plumb Balanced and Wesmark Small

Assuming the 90 days horizon Plumb Balanced Fund is expected to generate 0.59 times more return on investment than Wesmark Small. However, Plumb Balanced Fund is 1.7 times less risky than Wesmark Small. It trades about -0.05 of its potential returns per unit of risk. Wesmark Small Pany is currently generating about -0.06 per unit of risk. If you would invest  3,675  in Plumb Balanced Fund on December 28, 2024 and sell it today you would lose (89.00) from holding Plumb Balanced Fund or give up 2.42% of portfolio value over 90 days.

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

Plumb Balanced Fund  vs.  Wesmark Small Pany

Plumb Balanced

Risk-Adjusted Performance

Very Weak

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

Wesmark Small Pany

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wesmark Small Pany has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wesmark 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 Plumb Balanced and Wesmark Small

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

The idea behind Plumb Balanced Fund and Wesmark Small Pany 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.