Correlation Between Westwood Largecap and Ontrack Core

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

Diversification Opportunities for Westwood Largecap and Ontrack Core

-0.38

Correlation Coefficient

Westwood Largecap  Ontrack Core

Very good diversification

The 3 months correlation between Westwood and Ontrack is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Ontrack E Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ontrack E Fund 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 Ontrack Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ontrack E Fund has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Ontrack Core go up and down completely randomly.

Pair Corralation between Westwood Largecap and Ontrack Core

Assuming the 90 days horizon Westwood Largecap Value is expected to generate 3.27 times more return on investment than Ontrack Core. However, Westwood Largecap is 3.27 times more volatile than Ontrack E Fund. It trades about 0.12 of its potential returns per unit of risk. Ontrack E Fund is currently generating about 0.02 per unit of risk. If you would invest  1,464  in Westwood Largecap Value on September 4, 2024 and sell it today you would earn a total of  79.00  from holding Westwood Largecap Value or generate 5.4% return on investment over 90 days.

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

Westwood Largecap Value  vs.  Ontrack E Fund

Westwood Largecap Value

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood Largecap Value are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. 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.

Ontrack E Fund

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ontrack E Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Ontrack Core 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 Ontrack Core

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

The idea behind Westwood Largecap Value and Ontrack E Fund 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.