Correlation Between Growth Strategy and Westwood Alternative
Can any of the company-specific risk be diversified away by investing in both Growth Strategy and Westwood Alternative 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 Growth Strategy and Westwood Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Strategy Fund and Westwood Alternative Income, you can compare the effects of market volatilities on Growth Strategy and Westwood Alternative 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 Growth Strategy with a short position of Westwood Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and Westwood Alternative.
Diversification Opportunities for Growth Strategy and Westwood Alternative
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Growth and Westwood is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Westwood Alternative Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Alternative and Growth Strategy 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 Growth Strategy Fund are associated (or correlated) with Westwood Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Alternative has no effect on the direction of Growth Strategy i.e., Growth Strategy and Westwood Alternative go up and down completely randomly.
Pair Corralation between Growth Strategy and Westwood Alternative
Assuming the 90 days horizon Growth Strategy Fund is expected to under-perform the Westwood Alternative. In addition to that, Growth Strategy is 7.55 times more volatile than Westwood Alternative Income. It trades about -0.06 of its total potential returns per unit of risk. Westwood Alternative Income is currently generating about 0.27 per unit of volatility. If you would invest 965.00 in Westwood Alternative Income on December 2, 2024 and sell it today you would earn a total of 14.00 from holding Westwood Alternative Income or generate 1.45% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Growth Strategy Fund vs. Westwood Alternative Income
Performance |
Timeline |
Growth Strategy |
Westwood Alternative |
Growth Strategy and Westwood Alternative Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Growth Strategy and Westwood Alternative
The main advantage of trading using opposite Growth Strategy and Westwood Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Strategy position performs unexpectedly, Westwood Alternative 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 Westwood Alternative will offset losses from the drop in Westwood Alternative's long position.Growth Strategy vs. Ab Bond Inflation | Growth Strategy vs. Scout E Bond | Growth Strategy vs. Versatile Bond Portfolio | Growth Strategy vs. Nationwide Bond Index |
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Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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