Correlation Between Sierra Core and Westwood Alternative

Can any of the company-specific risk be diversified away by investing in both Sierra Core 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 Sierra Core and Westwood Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sierra E Retirement and Westwood Alternative Income, you can compare the effects of market volatilities on Sierra Core 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 Sierra Core with a short position of Westwood Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Core and Westwood Alternative.

Diversification Opportunities for Sierra Core and Westwood Alternative

0.06

Correlation Coefficient

Sierra Core  Westwood Alternative

Significant diversification

The 3 months correlation between Sierra and Westwood is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Westwood Alternative Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Alternative and Sierra Core 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 Sierra E Retirement 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 Sierra Core i.e., Sierra Core and Westwood Alternative go up and down completely randomly.

Pair Corralation between Sierra Core and Westwood Alternative

Assuming the 90 days horizon Sierra E Retirement is expected to under-perform the Westwood Alternative. In addition to that, Sierra Core is 4.73 times more volatile than Westwood Alternative Income. It trades about -0.02 of its total potential returns per unit of risk. Westwood Alternative Income is currently generating about 0.22 per unit of volatility. If you would invest  959.00  in Westwood Alternative Income on October 20, 2024 and sell it today you would earn a total of  11.00  from holding Westwood Alternative Income or generate 1.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Sierra E Retirement  vs.  Westwood Alternative Income

Sierra E Retirement

Risk-Adjusted Performance

0 of 100

Very Weak

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

Westwood Alternative

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood Alternative Income are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Westwood Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sierra Core and Westwood Alternative

The main advantage of trading using opposite Sierra Core and Westwood Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sierra Core 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.

The idea behind Sierra E Retirement and Westwood Alternative Income 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.