Correlation Between Artisan Select and Index Plus

Can any of the company-specific risk be diversified away by investing in both Artisan Select and Index Plus 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 Artisan Select and Index Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Artisan Select Equity and Index Plus Largecap, you can compare the effects of market volatilities on Artisan Select and Index Plus 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 Artisan Select with a short position of Index Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Artisan Select and Index Plus.

Diversification Opportunities for Artisan Select and Index Plus

0.65

Correlation Coefficient

Artisan Select  Index Plus

Poor diversification

The 3 months correlation between Artisan and Index is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Select Equity and Index Plus Largecap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Index Plus Largecap and Artisan Select 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 Artisan Select Equity are associated (or correlated) with Index Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Index Plus Largecap has no effect on the direction of Artisan Select i.e., Artisan Select and Index Plus go up and down completely randomly.

Pair Corralation between Artisan Select and Index Plus

Assuming the 90 days horizon Artisan Select is expected to generate 1.6 times less return on investment than Index Plus. But when comparing it to its historical volatility, Artisan Select Equity is 1.21 times less risky than Index Plus. It trades about 0.06 of its potential returns per unit of risk. Index Plus Largecap is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,772  in Index Plus Largecap on October 21, 2024 and sell it today you would earn a total of  250.00  from holding Index Plus Largecap or generate 9.02% return on investment over 90 days.

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

Artisan Select Equity  vs.  Index Plus Largecap

Artisan Select Equity

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan Select Equity are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Artisan Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Index Plus Largecap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Index Plus Largecap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Index Plus is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Artisan Select and Index Plus

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

The idea behind Artisan Select Equity and Index Plus Largecap 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.