Correlation Between Westcore Municipal and Westcore Small-cap

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

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

Diversification Opportunities for Westcore Municipal and Westcore Small-cap

-0.62

Correlation Coefficient

Westcore Municipal  Westcore Small-cap

Excellent diversification

The 3 months correlation between Westcore and Westcore is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Westcore Municipal Opportuniti and Westcore Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westcore Small Cap and Westcore Municipal 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 Municipal Opportunities are associated (or correlated) with Westcore Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westcore Small Cap has no effect on the direction of Westcore Municipal i.e., Westcore Municipal and Westcore Small-cap go up and down completely randomly.

Pair Corralation between Westcore Municipal and Westcore Small-cap

Assuming the 90 days horizon Westcore Municipal Opportunities is expected to generate 0.13 times more return on investment than Westcore Small-cap. However, Westcore Municipal Opportunities is 7.69 times less risky than Westcore Small-cap. It trades about 0.04 of its potential returns per unit of risk. Westcore Small Cap Growth is currently generating about -0.12 per unit of risk. If you would invest  955.00  in Westcore Municipal Opportunities on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Westcore Municipal Opportunities or generate 0.42% return on investment over 90 days.

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

Westcore Municipal Opportuniti  vs.  Westcore Small Cap Growth

Westcore Municipal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Westcore Municipal Opportunities are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Westcore Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Westcore Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westcore Small Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Westcore Municipal and Westcore Small-cap

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

The idea behind Westcore Municipal Opportunities and Westcore Small Cap Growth 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.