Correlation Between Avantis Core and Avantis Small

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

Diversification Opportunities for Avantis Core and Avantis Small

-0.08

Correlation Coefficient

Avantis Core  Avantis Small

Good diversification

The 3 months correlation between Avantis and Avantis is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Core Municipal 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 Core 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 Core Municipal 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 Core i.e., Avantis Core and Avantis Small go up and down completely randomly.

Pair Corralation between Avantis Core and Avantis Small

If you would invest  1,075  in Avantis Small Cap on September 3, 2024 and sell it today you would earn a total of  118.00  from holding Avantis Small Cap or generate 10.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Avantis Core Municipal  vs.  Avantis Small Cap

Avantis Core Municipal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avantis Core Municipal has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Avantis Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Avantis Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Avantis Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Avantis Core and Avantis Small

The main advantage of trading using opposite Avantis Core and Avantis Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Core 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 Core Municipal 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.