Correlation Between Small Pany and Equity Growth

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

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

Diversification Opportunities for Small Pany and Equity Growth

0.86

Correlation Coefficient

Small Pany  Equity Growth

Very poor diversification

The 3 months correlation between Small and Equity is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Fund and Equity Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth and Small Pany 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 Small Pany Fund are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Small Pany i.e., Small Pany and Equity Growth go up and down completely randomly.

Pair Corralation between Small Pany and Equity Growth

Assuming the 90 days horizon Small Pany is expected to generate 1.52 times less return on investment than Equity Growth. In addition to that, Small Pany is 1.73 times more volatile than Equity Growth Fund. It trades about 0.08 of its total potential returns per unit of risk. Equity Growth Fund is currently generating about 0.2 per unit of volatility. If you would invest  3,181  in Equity Growth Fund on September 15, 2024 and sell it today you would earn a total of  286.00  from holding Equity Growth Fund or generate 8.99% return on investment over 90 days.

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

Small Pany Fund  vs.  Equity Growth Fund

Small Pany Fund

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Small Pany is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Equity Growth

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Growth Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Equity Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Small Pany and Equity Growth

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

The idea behind Small Pany Fund and Equity Growth Fund 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.