Correlation Between Ultimus Managers and Westwood Quality

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

By analyzing existing cross correlation between Ultimus Managers Trust and Westwood Quality Smallcap, you can compare the effects of market volatilities on Ultimus Managers and Westwood Quality 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 Ultimus Managers with a short position of Westwood Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultimus Managers and Westwood Quality.

Diversification Opportunities for Ultimus Managers and Westwood Quality

0.88

Correlation Coefficient

Ultimus Managers  Westwood Quality

Very poor diversification

The 3 months correlation between Ultimus and Westwood is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ultimus Managers Trust and Westwood Quality Smallcap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwood Quality Smallcap and Ultimus Managers 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 Ultimus Managers Trust are associated (or correlated) with Westwood Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwood Quality Smallcap has no effect on the direction of Ultimus Managers i.e., Ultimus Managers and Westwood Quality go up and down completely randomly.

Pair Corralation between Ultimus Managers and Westwood Quality

Assuming the 90 days horizon Ultimus Managers is expected to generate 1.5 times less return on investment than Westwood Quality. But when comparing it to its historical volatility, Ultimus Managers Trust is 1.8 times less risky than Westwood Quality. It trades about 0.13 of its potential returns per unit of risk. Westwood Quality Smallcap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,111  in Westwood Quality Smallcap on September 12, 2024 and sell it today you would earn a total of  175.00  from holding Westwood Quality Smallcap or generate 8.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Ultimus Managers Trust  vs.  Westwood Quality Smallcap

Ultimus Managers Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ultimus Managers Trust are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Ultimus Managers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Westwood Quality Smallcap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Westwood Quality Smallcap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Westwood Quality may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ultimus Managers and Westwood Quality

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

The idea behind Ultimus Managers Trust and Westwood Quality Smallcap 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.