Correlation Between Avantis International and Avantis Small

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

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

Diversification Opportunities for Avantis International and Avantis Small

0.0

Correlation Coefficient

Avantis International  Avantis Small

Pay attention - limited upside

The 3 months correlation between Avantis and Avantis is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Avantis International Equity and Avantis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Small Cap and Avantis International 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 Avantis International Equity are associated (or correlated) with Avantis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Small Cap has no effect on the direction of Avantis International i.e., Avantis International and Avantis Small go up and down completely randomly.

Pair Corralation between Avantis International and Avantis Small

Given the investment horizon of 90 days Avantis International Equity is expected to generate 0.72 times more return on investment than Avantis Small. However, Avantis International Equity is 1.38 times less risky than Avantis Small. It trades about 0.11 of its potential returns per unit of risk. Avantis Small Cap is currently generating about -0.2 per unit of risk. If you would invest  6,329  in Avantis International Equity on November 28, 2024 and sell it today you would earn a total of  286.00  from holding Avantis International Equity or generate 4.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Avantis International Equity  vs.  Avantis Small Cap

Avantis International

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis International Equity are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Avantis International is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Avantis Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantis Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Etf's basic indicators remain fairly stable which may send shares a bit higher in March 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Pair Trading with Avantis International and Avantis Small

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

The idea behind Avantis International Equity and Avantis Small 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.