Correlation Between Enhanced Large and Westwood Income

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

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

Diversification Opportunities for Enhanced Large and Westwood Income

0.88

Correlation Coefficient

Enhanced Large  Westwood Income

Very poor diversification

The 3 months correlation between Enhanced and Westwood is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Large Pany and Westwood Income Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Income Oppo and Enhanced Large 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 Enhanced Large Pany 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 Income Oppo has no effect on the direction of Enhanced Large i.e., Enhanced Large and Westwood Income go up and down completely randomly.

Pair Corralation between Enhanced Large and Westwood Income

Assuming the 90 days horizon Enhanced Large Pany is expected to generate 1.94 times more return on investment than Westwood Income. However, Enhanced Large is 1.94 times more volatile than Westwood Income Opportunity. It trades about 0.19 of its potential returns per unit of risk. Westwood Income Opportunity is currently generating about 0.13 per unit of risk. If you would invest  1,455  in Enhanced Large Pany on September 13, 2024 and sell it today you would earn a total of  122.00  from holding Enhanced Large Pany or generate 8.38% return on investment over 90 days.

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

Enhanced Large Pany  vs.  Westwood Income Opportunity

Enhanced Large Pany

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enhanced Large Pany are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Enhanced Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Westwood Income Oppo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood Income Opportunity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental 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 Enhanced Large and Westwood Income

The main advantage of trading using opposite Enhanced Large and Westwood Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhanced Large 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 Enhanced Large Pany 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..