Correlation Between Artisan Small and Small Cap

Can any of the company-specific risk be diversified away by investing in both Artisan Small 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 Artisan Small and Small Cap 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 Small Cap Special, you can compare the effects of market volatilities on Artisan Small 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 Artisan Small with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Artisan Small and Small Cap.

Diversification Opportunities for Artisan Small and Small Cap

0.89

Correlation Coefficient

Artisan Small  Small Cap

Very poor diversification

The 3 months correlation between Artisan and Small is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Small Cap and Small Cap Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Special 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 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 Special has no effect on the direction of Artisan Small i.e., Artisan Small and Small Cap go up and down completely randomly.

Pair Corralation between Artisan Small and Small Cap

Assuming the 90 days horizon Artisan Small Cap is expected to under-perform the Small Cap. In addition to that, Artisan Small is 2.43 times more volatile than Small Cap Special. It trades about -0.1 of its total potential returns per unit of risk. Small Cap Special is currently generating about -0.03 per unit of volatility. If you would invest  1,344  in Small Cap Special on September 13, 2024 and sell it today you would lose (6.00) from holding Small Cap Special or give up 0.45% of portfolio value over 90 days.

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

Artisan Small Cap  vs.  Small Cap Special

Artisan Small Cap

Risk-Adjusted Performance

5 of 100

Modest

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

Small Cap Special

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Special are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Artisan Small and Small Cap

The main advantage of trading using opposite Artisan Small and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Artisan Small 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 Artisan Small Cap and Small Cap Special 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.