Correlation Between Westcore Global and Davenport Small

Can any of the company-specific risk be diversified away by investing in both Westcore Global and Davenport Small 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 Westcore Global and Davenport Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Westcore Global Large Cap and Davenport Small Cap, you can compare the effects of market volatilities on Westcore Global and Davenport Small 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 Westcore Global with a short position of Davenport Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westcore Global and Davenport Small.

Diversification Opportunities for Westcore Global and Davenport Small

0.67

Correlation Coefficient

Westcore Global  Davenport Small

Poor diversification

The 3 months correlation between Westcore and Davenport is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Westcore Global Large Cap and Davenport Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davenport Small Cap and Westcore Global 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 Westcore Global Large Cap are associated (or correlated) with Davenport Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davenport Small Cap has no effect on the direction of Westcore Global i.e., Westcore Global and Davenport Small go up and down completely randomly.

Pair Corralation between Westcore Global and Davenport Small

Assuming the 90 days horizon Westcore Global is expected to generate 154.9 times less return on investment than Davenport Small. But when comparing it to its historical volatility, Westcore Global Large Cap is 1.24 times less risky than Davenport Small. It trades about 0.0 of its potential returns per unit of risk. Davenport Small Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,713  in Davenport Small Cap on September 13, 2024 and sell it today you would earn a total of  169.00  from holding Davenport Small Cap or generate 9.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Westcore Global Large Cap  vs.  Davenport Small Cap

Westcore Global Large

Risk-Adjusted Performance

0 of 100

Very Weak

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

Davenport Small Cap

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Davenport Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Davenport Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Westcore Global and Davenport Small

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

The idea behind Westcore Global Large Cap and Davenport Small Cap 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.