Correlation Between Small Cap and Janus Overseas

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

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

Diversification Opportunities for Small Cap and Janus Overseas

0.0

Correlation Coefficient

Small Cap  Janus Overseas

Pay attention - limited upside

The 3 months correlation between Small and Janus is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and Janus Overseas Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Overseas and Small Cap 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 Small Cap Value Fund are associated (or correlated) with Janus Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Overseas has no effect on the direction of Small Cap i.e., Small Cap and Janus Overseas go up and down completely randomly.

Pair Corralation between Small Cap and Janus Overseas

Assuming the 90 days horizon Small Cap Value Fund is expected to under-perform the Janus Overseas. In addition to that, Small Cap is 2.28 times more volatile than Janus Overseas Fund. It trades about -0.46 of its total potential returns per unit of risk. Janus Overseas Fund is currently generating about -0.11 per unit of volatility. If you would invest  4,643  in Janus Overseas Fund on September 29, 2024 and sell it today you would lose (81.00) from holding Janus Overseas Fund or give up 1.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Small Cap Value Fund  vs.  Janus Overseas Fund

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Janus Overseas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Janus Overseas Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Small Cap and Janus Overseas

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

The idea behind Small Cap Value Fund and Janus Overseas Fund 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.