Correlation Between Westwood Total and Westwood Income

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

By analyzing existing cross correlation between Westwood Total Return and Westwood Income Opportunity, you can compare the effects of market volatilities on Westwood Total and Westwood Income 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 Total with a short position of Westwood Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Total and Westwood Income.

Diversification Opportunities for Westwood Total and Westwood Income

0.98

Correlation Coefficient

Westwood Total  Westwood Income

Almost no diversification

The 3 months correlation between Westwood and Westwood is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Total Return and Westwood Income Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Me Opportunity and Westwood Total 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 Total Return are associated (or correlated) with Westwood Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Me Opportunity has no effect on the direction of Westwood Total i.e., Westwood Total and Westwood Income go up and down completely randomly.

Pair Corralation between Westwood Total and Westwood Income

Assuming the 90 days horizon Westwood Total Return is expected to generate 1.18 times more return on investment than Westwood Income. However, Westwood Total is 1.18 times more volatile than Westwood Income Opportunity. It trades about 0.0 of its potential returns per unit of risk. Westwood Income Opportunity is currently generating about 0.0 per unit of risk. If you would invest  665.00  in Westwood Total Return on February 2, 2024 and sell it today you would earn a total of  0.00  from holding Westwood Total Return or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Westwood Total Return  vs.  Westwood Income Opportunity

Westwood Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westwood Total Return has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Westwood Total is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Westwood Me Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westwood Income Opportunity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Westwood Income 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 Total and Westwood Income

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

The idea behind Westwood Total Return and Westwood Income Opportunity 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.