Correlation Between Small Cap and Delaware Value

Can any of the company-specific risk be diversified away by investing in both Small Cap and Delaware Value 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 Small Cap and Delaware Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Small Cap Value and Delaware Value Fund, you can compare the effects of market volatilities on Small Cap and Delaware Value 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 Small Cap with a short position of Delaware Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Delaware Value.

Diversification Opportunities for Small Cap and Delaware Value

0.94

Correlation Coefficient

Small Cap  Delaware Value

Almost no diversification

The 3 months correlation between Small and Delaware is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Delaware Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delaware Value and Small Cap 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 Small Cap Value are associated (or correlated) with Delaware Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delaware Value has no effect on the direction of Small Cap i.e., Small Cap and Delaware Value go up and down completely randomly.

Pair Corralation between Small Cap and Delaware Value

Assuming the 90 days horizon Small Cap Value is expected to generate 0.42 times more return on investment than Delaware Value. However, Small Cap Value is 2.38 times less risky than Delaware Value. It trades about -0.17 of its potential returns per unit of risk. Delaware Value Fund is currently generating about -0.14 per unit of risk. If you would invest  1,207  in Small Cap Value on December 3, 2024 and sell it today you would lose (154.00) from holding Small Cap Value or give up 12.76% of portfolio value over 90 days.

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

Small Cap Value  vs.  Delaware Value Fund

Small Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Delaware Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Delaware Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Small Cap and Delaware Value

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

The idea behind Small Cap Value and Delaware Value Fund 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..