Correlation Between Avantis Small and ETF Series

Can any of the company-specific risk be diversified away by investing in both Avantis Small and ETF Series 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 ETF Series 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 ETF Series Solutions, you can compare the effects of market volatilities on Avantis Small and ETF Series 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 ETF Series. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Small and ETF Series.

Diversification Opportunities for Avantis Small and ETF Series

0.97

Correlation Coefficient

Avantis Small  ETF Series

Almost no diversification

The 3 months correlation between Avantis and ETF is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Avantis Small i.e., Avantis Small and ETF Series go up and down completely randomly.

Pair Corralation between Avantis Small and ETF Series

Given the investment horizon of 90 days Avantis Small Cap is expected to generate 1.13 times more return on investment than ETF Series. However, Avantis Small is 1.13 times more volatile than ETF Series Solutions. It trades about -0.2 of its potential returns per unit of risk. ETF Series Solutions is currently generating about -0.23 per unit of risk. If you would invest  10,504  in Avantis Small Cap on November 28, 2024 and sell it today you would lose (1,181) from holding Avantis Small Cap or give up 11.24% of portfolio value over 90 days.

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

Avantis Small Cap  vs.  ETF Series Solutions

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.

ETF Series Solutions

Risk-Adjusted Performance

Very Weak

Over the last 90 days ETF Series Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Etf's primary indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Avantis Small and ETF Series

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

The idea behind Avantis Small Cap and ETF Series Solutions 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.