Correlation Between Westwood Largecap and Taiwan Closed

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

Diversification Opportunities for Westwood Largecap and Taiwan Closed

-0.14

Correlation Coefficient

Westwood Largecap  Taiwan Closed

Good diversification

The 3 months correlation between Westwood and Taiwan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Taiwan Closed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Closed 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 Taiwan Closed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Closed has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Taiwan Closed go up and down completely randomly.

Pair Corralation between Westwood Largecap and Taiwan Closed

Assuming the 90 days horizon Westwood Largecap Value is expected to under-perform the Taiwan Closed. In addition to that, Westwood Largecap is 1.28 times more volatile than Taiwan Closed. It trades about -0.2 of its total potential returns per unit of risk. Taiwan Closed is currently generating about 0.28 per unit of volatility. If you would invest  4,301  in Taiwan Closed on September 16, 2024 and sell it today you would earn a total of  274.00  from holding Taiwan Closed or generate 6.37% return on investment over 90 days.

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

Westwood Largecap Value  vs.  Taiwan Closed

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 fairly strong basic indicators, Westwood Largecap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Taiwan Closed

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Taiwan Closed are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile basic indicators, Taiwan Closed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Westwood Largecap and Taiwan Closed

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

The idea behind Westwood Largecap Value and Taiwan Closed 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.