Correlation Between Old Westbury and Small Cap

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

By analyzing existing cross correlation between Old Westbury Large and Small Cap Core, you can compare the effects of market volatilities on Old Westbury and Small Cap 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 Old Westbury with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Old Westbury and Small Cap.

Diversification Opportunities for Old Westbury and Small Cap

0.99

Correlation Coefficient

Old Westbury  Small Cap

No risk reduction

The 3 months correlation between Old and Small is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Old Westbury Large and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Old Westbury 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 Old Westbury Large are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Old Westbury i.e., Old Westbury and Small Cap go up and down completely randomly.

Pair Corralation between Old Westbury and Small Cap

Assuming the 90 days horizon Old Westbury is expected to generate 1.08 times less return on investment than Small Cap. But when comparing it to its historical volatility, Old Westbury Large is 1.85 times less risky than Small Cap. It trades about 0.4 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,022  in Small Cap Core on April 22, 2025 and sell it today you would earn a total of  174.00  from holding Small Cap Core or generate 17.03% return on investment over 90 days.

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

Old Westbury Large  vs.  Small Cap Core

Old Westbury Large

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Old Westbury Large are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Old Westbury showed solid returns over the last few months and may actually be approaching a breakup point.

Small Cap Core

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Core are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Old Westbury and Small Cap

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

The idea behind Old Westbury Large and Small Cap Core 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.