Correlation Between Avantis Emerging and Avantis Small

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

Diversification Opportunities for Avantis Emerging and Avantis Small

0.5

Correlation Coefficient

Avantis Emerging  Avantis Small

Very weak diversification

The 3 months correlation between Avantis and Avantis is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Emerging Markets 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 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 Avantis Emerging Markets 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 Emerging i.e., Avantis Emerging and Avantis Small go up and down completely randomly.

Pair Corralation between Avantis Emerging and Avantis Small

Given the investment horizon of 90 days Avantis Emerging is expected to generate 1.41 times less return on investment than Avantis Small. But when comparing it to its historical volatility, Avantis Emerging Markets is 1.45 times less risky than Avantis Small. It trades about 0.05 of its potential returns per unit of risk. Avantis Small Cap is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,934  in Avantis Small Cap on December 4, 2024 and sell it today you would earn a total of  2,109  from holding Avantis Small Cap or generate 30.42% return on investment over 90 days.

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

Avantis Emerging Markets  vs.  Avantis Small Cap

Avantis Emerging Markets

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantis Emerging Markets has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Avantis Emerging is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

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 April 2025. The latest fuss may also be a sign of long-term up-swing for the fund sophisticated investors.

Pair Trading with Avantis Emerging and Avantis Small

The main advantage of trading using opposite Avantis Emerging and Avantis Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Emerging 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 Emerging Markets 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.