Correlation Between Westwood Largecap and Rmb Mendon

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

Diversification Opportunities for Westwood Largecap and Rmb Mendon

0.44

Correlation Coefficient

Westwood Largecap  Rmb Mendon

Very weak diversification

The 3 months correlation between Westwood and Rmb is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Rmb Mendon Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rmb Mendon Financial 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 Rmb Mendon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rmb Mendon Financial has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Rmb Mendon go up and down completely randomly.

Pair Corralation between Westwood Largecap and Rmb Mendon

Assuming the 90 days horizon Westwood Largecap Value is expected to under-perform the Rmb Mendon. In addition to that, Westwood Largecap is 1.09 times more volatile than Rmb Mendon Financial. It trades about -0.34 of its total potential returns per unit of risk. Rmb Mendon Financial is currently generating about -0.35 per unit of volatility. If you would invest  4,725  in Rmb Mendon Financial on October 7, 2024 and sell it today you would lose (461.00) from holding Rmb Mendon Financial or give up 9.76% of portfolio value over 90 days.

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

Westwood Largecap Value  vs.  Rmb Mendon Financial

Westwood Largecap Value

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Rmb Mendon Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rmb Mendon Financial are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rmb Mendon may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Westwood Largecap and Rmb Mendon

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

The idea behind Westwood Largecap Value and Rmb Mendon Financial 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.