Correlation Between Avantis Small and VictoryShares Small

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

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

Diversification Opportunities for Avantis Small and VictoryShares Small

0.85

Correlation Coefficient

Avantis Small  VictoryShares Small

Very poor diversification

The 3 months correlation between Avantis and VictoryShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and VictoryShares Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VictoryShares Small Cap and Avantis 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 Avantis Small Cap are associated (or correlated) with VictoryShares Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VictoryShares Small Cap has no effect on the direction of Avantis Small i.e., Avantis Small and VictoryShares Small go up and down completely randomly.

Pair Corralation between Avantis Small and VictoryShares Small

Given the investment horizon of 90 days Avantis Small Cap is expected to under-perform the VictoryShares Small. In addition to that, Avantis Small is 1.05 times more volatile than VictoryShares Small Cap. It trades about -0.34 of its total potential returns per unit of risk. VictoryShares Small Cap is currently generating about -0.24 per unit of volatility. If you would invest  6,060  in VictoryShares Small Cap on December 4, 2024 and sell it today you would lose (317.00) from holding VictoryShares Small Cap or give up 5.23% of portfolio value over 90 days.

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

Avantis Small Cap  vs.  VictoryShares Small Cap

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.

VictoryShares Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days VictoryShares Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VictoryShares Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Avantis Small and VictoryShares Small

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

The idea behind Avantis Small Cap and VictoryShares 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.