Correlation Between Conestoga Small and Conestoga Smid

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

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

Diversification Opportunities for Conestoga Small and Conestoga Smid

1.0

Correlation Coefficient

Conestoga Small  Conestoga Smid

No risk reduction

The 3 months correlation between CONESTOGA and Conestoga is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Conestoga Small Cap and Conestoga Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conestoga Smid Cap and Conestoga 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 Conestoga Small Cap are associated (or correlated) with Conestoga Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conestoga Smid Cap has no effect on the direction of Conestoga Small i.e., Conestoga Small and Conestoga Smid go up and down completely randomly.

Pair Corralation between Conestoga Small and Conestoga Smid

Assuming the 90 days horizon Conestoga Small Cap is expected to generate 1.21 times more return on investment than Conestoga Smid. However, Conestoga Small is 1.21 times more volatile than Conestoga Smid Cap. It trades about 0.2 of its potential returns per unit of risk. Conestoga Smid Cap is currently generating about 0.22 per unit of risk. If you would invest  7,226  in Conestoga Small Cap on September 5, 2024 and sell it today you would earn a total of  1,110  from holding Conestoga Small Cap or generate 15.36% return on investment over 90 days.

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

Conestoga Small Cap  vs.  Conestoga Smid Cap

Conestoga Small Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Conestoga Small Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Conestoga Small showed solid returns over the last few months and may actually be approaching a breakup point.

Conestoga Smid Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Conestoga Smid Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Conestoga Smid showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Conestoga Small and Conestoga Smid

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

The idea behind Conestoga Small Cap and Conestoga Smid 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.