Correlation Between Acadian Emerging and Century Small

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

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

Diversification Opportunities for Acadian Emerging and Century Small

0.2

Correlation Coefficient

Acadian Emerging  Century Small

Modest diversification

The 3 months correlation between Acadian and Century is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Acadian Emerging Markets and Century Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Small Cap and Acadian Emerging 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 Acadian Emerging Markets are associated (or correlated) with Century Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Small Cap has no effect on the direction of Acadian Emerging i.e., Acadian Emerging and Century Small go up and down completely randomly.

Pair Corralation between Acadian Emerging and Century Small

Assuming the 90 days horizon Acadian Emerging Markets is expected to generate 0.65 times more return on investment than Century Small. However, Acadian Emerging Markets is 1.53 times less risky than Century Small. It trades about -0.02 of its potential returns per unit of risk. Century Small Cap is currently generating about -0.16 per unit of risk. If you would invest  2,301  in Acadian Emerging Markets on December 3, 2024 and sell it today you would lose (29.00) from holding Acadian Emerging Markets or give up 1.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Acadian Emerging Markets  vs.  Century Small Cap

Acadian Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Acadian Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Acadian Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Century Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Century Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Acadian Emerging and Century Small

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

The idea behind Acadian Emerging Markets and Century Small Cap 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.