Correlation Between City National and Hotchkis Wiley

Can any of the company-specific risk be diversified away by investing in both City National and Hotchkis Wiley 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 City National and Hotchkis Wiley into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between City National Rochdale and Hotchkis Wiley Global, you can compare the effects of market volatilities on City National and Hotchkis Wiley 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 City National with a short position of Hotchkis Wiley. Check out your portfolio center. Please also check ongoing floating volatility patterns of City National and Hotchkis Wiley.

Diversification Opportunities for City National and Hotchkis Wiley

0.75

Correlation Coefficient

City National  Hotchkis Wiley

Poor diversification

The 3 months correlation between City and Hotchkis is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding City National Rochdale and Hotchkis Wiley Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley Global and City National 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 City National Rochdale are associated (or correlated) with Hotchkis Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotchkis Wiley Global has no effect on the direction of City National i.e., City National and Hotchkis Wiley go up and down completely randomly.

Pair Corralation between City National and Hotchkis Wiley

Assuming the 90 days horizon City National Rochdale is expected to generate 0.21 times more return on investment than Hotchkis Wiley. However, City National Rochdale is 4.75 times less risky than Hotchkis Wiley. It trades about -0.02 of its potential returns per unit of risk. Hotchkis Wiley Global is currently generating about -0.04 per unit of risk. If you would invest  1,984  in City National Rochdale on September 12, 2024 and sell it today you would lose (1.00) from holding City National Rochdale or give up 0.05% of portfolio value over 90 days.

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

City National Rochdale  vs.  Hotchkis Wiley Global

City National Rochdale

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in City National Rochdale are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, City National is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hotchkis Wiley Global

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hotchkis Wiley Global are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Hotchkis Wiley is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with City National and Hotchkis Wiley

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

The idea behind City National Rochdale and Hotchkis Wiley Global 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.