Correlation Between Transam Short and Old Westbury

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

By analyzing existing cross correlation between Transam Short Term Bond and Old Westbury Short Term, you can compare the effects of market volatilities on Transam Short 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 Transam Short with a short position of Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transam Short and Old Westbury.

Diversification Opportunities for Transam Short and Old Westbury

0.66

Correlation Coefficient

Transam Short  Old Westbury

Poor diversification

The 3 months correlation between Transam and Old is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Transam Short Term Bond and Old Westbury Short Term in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Short and Transam Short 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 Transam Short Term Bond 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 Short has no effect on the direction of Transam Short i.e., Transam Short and Old Westbury go up and down completely randomly.

Pair Corralation between Transam Short and Old Westbury

Assuming the 90 days horizon Transam Short Term Bond is expected to generate 1.11 times more return on investment than Old Westbury. However, Transam Short is 1.11 times more volatile than Old Westbury Short Term. It trades about 0.15 of its potential returns per unit of risk. Old Westbury Short Term is currently generating about 0.12 per unit of risk. If you would invest  902.00  in Transam Short Term Bond on October 3, 2024 and sell it today you would earn a total of  78.00  from holding Transam Short Term Bond or generate 8.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	53.83%
Values	Daily Returns

Transam Short Term Bond  vs.  Old Westbury Short Term

Transam Short Term

Risk-Adjusted Performance

0 of 100

Very Weak

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

Old Westbury Short

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Transam Short and Old Westbury

The main advantage of trading using opposite Transam Short and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transam Short 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 Transam Short Term Bond and Old Westbury Short Term 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.