Correlation Between Westwood Short and Westwood Income

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

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

Diversification Opportunities for Westwood Short and Westwood Income

0.0

Correlation Coefficient

Westwood Short  Westwood Income

Pay attention - limited upside

The 3 months correlation between Westwood and Westwood is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Short Duration and Westwood Income Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Income Oppo and Westwood 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 Westwood Short Duration are associated (or correlated) with Westwood Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Income Oppo has no effect on the direction of Westwood Short i.e., Westwood Short and Westwood Income go up and down completely randomly.

Pair Corralation between Westwood Short and Westwood Income

If you would invest  988.00  in Westwood Short Duration on December 31, 2024 and sell it today you would earn a total of  2.00  from holding Westwood Short Duration or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.64%
Values	Daily Returns

Westwood Short Duration  vs.  Westwood Income Opportunity

Westwood Short Duration

Risk-Adjusted Performance

Very Weak

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

Westwood Income Oppo

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westwood Income Opportunity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Westwood Income 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 Short and Westwood Income

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

The idea behind Westwood Short Duration and Westwood Income Opportunity 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.