Correlation Between William Blair and Small Company

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

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

Diversification Opportunities for William Blair and Small Company

-0.65

Correlation Coefficient

William Blair  Small Company

Excellent diversification

The 3 months correlation between William and Small is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding William Blair International and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and William Blair 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 William Blair International are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of William Blair i.e., William Blair and Small Company go up and down completely randomly.

Pair Corralation between William Blair and Small Company

Assuming the 90 days horizon William Blair International is expected to under-perform the Small Company. But the mutual fund apears to be less risky and, when comparing its historical volatility, William Blair International is 2.59 times less risky than Small Company. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Small Pany Growth is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  1,122  in Small Pany Growth on September 4, 2024 and sell it today you would earn a total of  547.00  from holding Small Pany Growth or generate 48.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

William Blair International  vs.  Small Pany Growth

William Blair Intern

Risk-Adjusted Performance

0 of 100

Very Weak

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

Small Pany Growth

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Company showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with William Blair and Small Company

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

The idea behind William Blair International and Small Pany Growth 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.