Correlation Between Westwood Market and Sit Government
Can any of the company-specific risk be diversified away by investing in both Westwood Market and Sit Government 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 Market and Sit Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Westwood Market Neutral and Sit Government Securities, you can compare the effects of market volatilities on Westwood Market and Sit Government 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 Market with a short position of Sit Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Market and Sit Government.
Diversification Opportunities for Westwood Market and Sit Government
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Westwood and Sit is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Market Neutral and Sit Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Government Securities and Westwood Market 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 Market Neutral are associated (or correlated) with Sit Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Government Securities has no effect on the direction of Westwood Market i.e., Westwood Market and Sit Government go up and down completely randomly.
Pair Corralation between Westwood Market and Sit Government
Assuming the 90 days horizon Westwood Market Neutral is expected to generate 0.39 times more return on investment than Sit Government. However, Westwood Market Neutral is 2.55 times less risky than Sit Government. It trades about 0.11 of its potential returns per unit of risk. Sit Government Securities is currently generating about -0.18 per unit of risk. If you would invest 966.00 in Westwood Market Neutral on September 28, 2024 and sell it today you would earn a total of 6.00 from holding Westwood Market Neutral or generate 0.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Westwood Market Neutral vs. Sit Government Securities
Performance |
Timeline |
Westwood Market Neutral |
Sit Government Securities |
Westwood Market and Sit Government Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Westwood Market and Sit Government
The main advantage of trading using opposite Westwood Market and Sit Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Market position performs unexpectedly, Sit Government 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 Sit Government will offset losses from the drop in Sit Government's long position.Westwood Market vs. Sit Government Securities | Westwood Market vs. Inverse Government Long | Westwood Market vs. Long Term Government Fund | Westwood Market vs. Intermediate Government Bond |
Sit Government vs. Sit Small Cap | Sit Government vs. Sit Global Dividend | Sit Government vs. Sit Global Dividend | Sit Government vs. Sit Small Cap |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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