Correlation Between Artisan Small and Eventide Large

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

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

Diversification Opportunities for Artisan Small and Eventide Large

0.81

Correlation Coefficient

Artisan Small  Eventide Large

Very poor diversification

The 3 months correlation between Artisan and Eventide is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Small Cap and Eventide Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eventide Large Cap and Artisan Small 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 Small Cap are associated (or correlated) with Eventide Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eventide Large Cap has no effect on the direction of Artisan Small i.e., Artisan Small and Eventide Large go up and down completely randomly.

Pair Corralation between Artisan Small and Eventide Large

Assuming the 90 days horizon Artisan Small Cap is expected to generate 1.69 times more return on investment than Eventide Large. However, Artisan Small is 1.69 times more volatile than Eventide Large Cap. It trades about 0.22 of its potential returns per unit of risk. Eventide Large Cap is currently generating about 0.13 per unit of risk. If you would invest  3,393  in Artisan Small Cap on September 5, 2024 and sell it today you would earn a total of  577.00  from holding Artisan Small Cap or generate 17.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Artisan Small Cap  vs.  Eventide Large Cap

Artisan Small Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan Small Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Artisan Small showed solid returns over the last few months and may actually be approaching a breakup point.

Eventide Large Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eventide Large Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Eventide Large 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 Small and Eventide Large

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

The idea behind Artisan Small Cap and Eventide Large 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.