Correlation Between Avantis Us and Small Cap

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

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

Diversification Opportunities for Avantis Us and Small Cap

0.54

Correlation Coefficient

Avantis Us  Small Cap

Very weak diversification

The 3 months correlation between Avantis and Small is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Large Cap 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 Avantis Us 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 Avantis Large Cap 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 Avantis Us i.e., Avantis Us and Small Cap go up and down completely randomly.

Pair Corralation between Avantis Us and Small Cap

Assuming the 90 days horizon Avantis Large Cap is expected to generate 0.62 times more return on investment than Small Cap. However, Avantis Large Cap is 1.61 times less risky than Small Cap. It trades about 0.07 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.01 per unit of risk. If you would invest  1,120  in Avantis Large Cap on October 24, 2024 and sell it today you would earn a total of  368.00  from holding Avantis Large Cap or generate 32.86% return on investment over 90 days.

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

Avantis Large Cap  vs.  Small Cap Core

Avantis Large Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Large Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Avantis Us is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Core

Risk-Adjusted Performance

0 of 100

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 latest conflicting 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 Avantis Us and Small Cap

The main advantage of trading using opposite Avantis Us and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Us 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 Avantis Large Cap 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 CEOs Directory module to screen CEOs from public companies around the world.