Correlation Between Intermediate-term and Old Westbury
Can any of the company-specific risk be diversified away by investing in both Intermediate-term 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 Intermediate-term and Old Westbury into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Tax Free Bond and Old Westbury California, you can compare the effects of market volatilities on Intermediate-term 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 Intermediate-term with a short position of Old Westbury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Old Westbury.
Diversification Opportunities for Intermediate-term and Old Westbury
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Intermediate-term and Old is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon and Old Westbury California in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Westbury California and Intermediate-term 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 Intermediate Term Tax Free 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 California has no effect on the direction of Intermediate-term i.e., Intermediate-term and Old Westbury go up and down completely randomly.
Pair Corralation between Intermediate-term and Old Westbury
Assuming the 90 days horizon Intermediate-term is expected to generate 1.55 times less return on investment than Old Westbury. In addition to that, Intermediate-term is 1.49 times more volatile than Old Westbury California. It trades about 0.17 of its total potential returns per unit of risk. Old Westbury California is currently generating about 0.39 per unit of volatility. If you would invest 952.00 in Old Westbury California on May 26, 2025 and sell it today you would earn a total of 20.00 from holding Old Westbury California or generate 2.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Term Tax Free Bon vs. Old Westbury California
Performance |
| Timeline |
| Intermediate Term Tax |
| Old Westbury California |
Intermediate-term and Old Westbury Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate-term and Old Westbury
The main advantage of trading using opposite Intermediate-term and Old Westbury positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term 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 Intermediate Term Tax Free Bond and Old Westbury California 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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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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