Correlation Between Armada Hflr and Small Cap

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Can any of the company-specific risk be diversified away by investing in both Armada Hflr and Small Cap 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 Armada Hflr and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Armada Hflr Pr and Small Cap Core, you can compare the effects of market volatilities on Armada Hflr and Small Cap 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 Armada Hflr with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and Small Cap.

Diversification Opportunities for Armada Hflr and Small Cap

ArmadaSmallDiversified AwayArmadaSmallDiversified Away100%
0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Armada and Small is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Armada Hflr i.e., Armada Hflr and Small Cap go up and down completely randomly.

Pair Corralation between Armada Hflr and Small Cap

Considering the 90-day investment horizon Armada Hflr Pr is expected to generate 0.6 times more return on investment than Small Cap. However, Armada Hflr Pr is 1.66 times less risky than Small Cap. It trades about -0.12 of its potential returns per unit of risk. Small Cap Core is currently generating about -0.12 per unit of risk. If you would invest  1,065  in Armada Hflr Pr on October 13, 2024 and sell it today you would lose (95.00) from holding Armada Hflr Pr or give up 8.92% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Armada Hflr Pr  vs.  Small Cap Core

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -10-50510
JavaScript chart by amCharts 3.21.15AHH SCRZX
       Timeline  
Armada Hflr Pr 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan9.69.81010.210.410.610.81111.2
Small Cap Core 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Small Cap Core 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan1212.51313.51414.515

Armada Hflr and Small Cap Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.98-1.51-1.04-0.57-0.09840.30.771.241.712.18 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15AHH SCRZX
       Returns  

Pair Trading with Armada Hflr and Small Cap

The main advantage of trading using opposite Armada Hflr and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.
The idea behind Armada Hflr Pr and Small Cap Core 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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