Correlation Between Scout Core and Old Westbury

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

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

Diversification Opportunities for Scout Core and Old Westbury

0.95

Correlation Coefficient

Scout Core  Old Westbury

Almost no diversification

The 3 months correlation between Scout and Old is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Scout E Bond and Old Westbury Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury Fixed and Scout Core 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 Scout E Bond are associated (or correlated) with Old Westbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Westbury Fixed has no effect on the direction of Scout Core i.e., Scout Core and Old Westbury go up and down completely randomly.

Pair Corralation between Scout Core and Old Westbury

Assuming the 90 days horizon Scout E Bond is expected to generate 1.23 times more return on investment than Old Westbury. However, Scout Core is 1.23 times more volatile than Old Westbury Fixed. It trades about 0.2 of its potential returns per unit of risk. Old Westbury Fixed is currently generating about 0.17 per unit of risk. If you would invest  1,045  in Scout E Bond on January 8, 2025 and sell it today you would earn a total of  40.00  from holding Scout E Bond or generate 3.83% return on investment over 90 days.

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

Scout E Bond  vs.  Old Westbury Fixed

Scout E Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Scout E Bond are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Scout Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Old Westbury Fixed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Old Westbury Fixed are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Old Westbury is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scout Core and Old Westbury

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

The idea behind Scout E Bond and Old Westbury Fixed 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.