Correlation Between Artisan Emerging and Russell 2000

Can any of the company-specific risk be diversified away by investing in both Artisan Emerging and Russell 2000 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 Emerging and Russell 2000 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Artisan Emerging Markets and Russell 2000 2x, you can compare the effects of market volatilities on Artisan Emerging and Russell 2000 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 Emerging with a short position of Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Artisan Emerging and Russell 2000.

Diversification Opportunities for Artisan Emerging and Russell 2000

0.6

Correlation Coefficient

Artisan Emerging  Russell 2000

Poor diversification

The 3 months correlation between Artisan and Russell is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Emerging Markets and Russell 2000 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 2x and Artisan 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 Artisan Emerging Markets are associated (or correlated) with Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 2x has no effect on the direction of Artisan Emerging i.e., Artisan Emerging and Russell 2000 go up and down completely randomly.

Pair Corralation between Artisan Emerging and Russell 2000

Assuming the 90 days horizon Artisan Emerging Markets is expected to under-perform the Russell 2000. But the mutual fund apears to be less risky and, when comparing its historical volatility, Artisan Emerging Markets is 12.44 times less risky than Russell 2000. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Russell 2000 2x is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  14,330  in Russell 2000 2x on October 1, 2024 and sell it today you would lose (176.00) from holding Russell 2000 2x or give up 1.23% of portfolio value over 90 days.

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

Artisan Emerging Markets  vs.  Russell 2000 2x

Artisan Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

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

Russell 2000 2x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Russell 2000 2x has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Russell 2000 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 Emerging and Russell 2000

The main advantage of trading using opposite Artisan Emerging and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Artisan Emerging position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.

The idea behind Artisan Emerging Markets and Russell 2000 2x 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.