Correlation Between Westwood Largecap and Vanguard 500
Can any of the company-specific risk be diversified away by investing in both Westwood Largecap and Vanguard 500 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 Vanguard 500 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 Vanguard 500 Index, you can compare the effects of market volatilities on Westwood Largecap and Vanguard 500 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 Vanguard 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Westwood Largecap and Vanguard 500.
Diversification Opportunities for Westwood Largecap and Vanguard 500
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Westwood and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Westwood Largecap Value and Vanguard 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard 500 Index 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 Vanguard 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard 500 Index has no effect on the direction of Westwood Largecap i.e., Westwood Largecap and Vanguard 500 go up and down completely randomly.
Pair Corralation between Westwood Largecap and Vanguard 500
Assuming the 90 days horizon Westwood Largecap is expected to generate 1.56 times less return on investment than Vanguard 500. But when comparing it to its historical volatility, Westwood Largecap Value is 1.17 times less risky than Vanguard 500. It trades about 0.05 of its potential returns per unit of risk. Vanguard 500 Index is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 34,386 in Vanguard 500 Index on January 25, 2024 and sell it today you would earn a total of 12,442 from holding Vanguard 500 Index or generate 36.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Westwood Largecap Value vs. Vanguard 500 Index
Performance |
Timeline |
Westwood Largecap Value |
Vanguard 500 Index |
Westwood Largecap and Vanguard 500 Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Westwood Largecap and Vanguard 500
The main advantage of trading using opposite Westwood Largecap and Vanguard 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westwood Largecap position performs unexpectedly, Vanguard 500 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 Vanguard 500 will offset losses from the drop in Vanguard 500's long position.Westwood Largecap vs. Edgewood Growth Fund | Westwood Largecap vs. Hartford Schroders Emerging | Westwood Largecap vs. HUMANA INC | Westwood Largecap vs. Aquagold International |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Content Syndication Quickly integrate customizable finance content to your own investment portal | |
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |