Correlation Between Westwood Largecap and Advisors Capital

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

By analyzing existing cross correlation between Westwood Largecap Value and Advisors Capital Tactical, you can compare the effects of market volatilities on Westwood Largecap and Advisors Capital 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 Westwood Largecap with a short position of Advisors Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Largecap and Advisors Capital.

Diversification Opportunities for Westwood Largecap and Advisors Capital

-0.34

Correlation Coefficient

Westwood Largecap  Advisors Capital

Very good diversification

The 3 months correlation between Westwood and Advisors is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Advisors Capital Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Capital Tactical and Westwood Largecap 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 Westwood Largecap Value are associated (or correlated) with Advisors Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Capital Tactical has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Advisors Capital go up and down completely randomly.

Pair Corralation between Westwood Largecap and Advisors Capital

Assuming the 90 days horizon Westwood Largecap Value is expected to under-perform the Advisors Capital. In addition to that, Westwood Largecap is 3.74 times more volatile than Advisors Capital Tactical. It trades about -0.05 of its total potential returns per unit of risk. Advisors Capital Tactical is currently generating about -0.12 per unit of volatility. If you would invest  984.00  in Advisors Capital Tactical on September 15, 2024 and sell it today you would lose (20.00) from holding Advisors Capital Tactical or give up 2.03% of portfolio value over 90 days.

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

Westwood Largecap Value  vs.  Advisors Capital Tactical

Westwood Largecap Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Advisors Capital Tactical

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Westwood Largecap and Advisors Capital

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

The idea behind Westwood Largecap Value and Advisors Capital Tactical 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 Commodity Directory module to find actively traded commodities issued by global exchanges.