Correlation Between Westwood Largecap and Geneva Smid

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

Diversification Opportunities for Westwood Largecap and Geneva Smid

0.71

Correlation Coefficient

Westwood Largecap  Geneva Smid

Poor diversification

The 3 months correlation between Westwood and Geneva is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Geneva Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geneva Smid Cap 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 Geneva Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geneva Smid Cap has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Geneva Smid go up and down completely randomly.

Pair Corralation between Westwood Largecap and Geneva Smid

Assuming the 90 days horizon Westwood Largecap Value is expected to generate 0.65 times more return on investment than Geneva Smid. However, Westwood Largecap Value is 1.53 times less risky than Geneva Smid. It trades about -0.01 of its potential returns per unit of risk. Geneva Smid Cap is currently generating about -0.07 per unit of risk. If you would invest  1,369  in Westwood Largecap Value on December 27, 2024 and sell it today you would lose (6.00) from holding Westwood Largecap Value or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Westwood Largecap Value  vs.  Geneva Smid Cap

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.

Geneva Smid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Geneva Smid Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Geneva Smid 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 Largecap and Geneva Smid

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

The idea behind Westwood Largecap Value and Geneva Smid 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.