Correlation Between Westwood Largecap and Blackrock Enhanced

Can any of the company-specific risk be diversified away by investing in both Westwood Largecap and Blackrock Enhanced 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 Blackrock Enhanced 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 Blackrock Enhanced Capital, you can compare the effects of market volatilities on Westwood Largecap and Blackrock Enhanced 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 Blackrock Enhanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Largecap and Blackrock Enhanced.

Diversification Opportunities for Westwood Largecap and Blackrock Enhanced

0.89

Correlation Coefficient

Westwood Largecap  Blackrock Enhanced

Very poor diversification

The 3 months correlation between Westwood and Blackrock is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Blackrock Enhanced Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackrock Enhanced 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 Blackrock Enhanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackrock Enhanced has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Blackrock Enhanced go up and down completely randomly.

Pair Corralation between Westwood Largecap and Blackrock Enhanced

Assuming the 90 days horizon Westwood Largecap Value is expected to generate 0.81 times more return on investment than Blackrock Enhanced. However, Westwood Largecap Value is 1.24 times less risky than Blackrock Enhanced. It trades about -0.01 of its potential returns per unit of risk. Blackrock Enhanced Capital is currently generating about -0.11 per unit of risk. If you would invest  1,356  in Westwood Largecap Value on December 30, 2024 and sell it today you would lose (10.00) from holding Westwood Largecap Value or give up 0.74% of portfolio value over 90 days.

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

Westwood Largecap Value  vs.  Blackrock Enhanced Capital

Westwood Largecap Value

Risk-Adjusted Performance

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 basic indicators, Westwood Largecap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Blackrock Enhanced

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blackrock Enhanced Capital has generated negative risk-adjusted returns adding no value to fund investors. Despite fairly strong forward indicators, Blackrock Enhanced is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Westwood Largecap and Blackrock Enhanced

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

The idea behind Westwood Largecap Value and Blackrock Enhanced Capital 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.