Correlation Between Conestoga Smid and Df Dent

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

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

Diversification Opportunities for Conestoga Smid and Df Dent

0.94

Correlation Coefficient

Conestoga Smid  Df Dent

Almost no diversification

The 3 months correlation between Conestoga and DFDSX is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Conestoga Smid Cap and Df Dent Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Df Dent Small and Conestoga Smid 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 Smid Cap are associated (or correlated) with Df Dent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Df Dent Small has no effect on the direction of Conestoga Smid i.e., Conestoga Smid and Df Dent go up and down completely randomly.

Pair Corralation between Conestoga Smid and Df Dent

Assuming the 90 days horizon Conestoga Smid Cap is expected to generate 0.93 times more return on investment than Df Dent. However, Conestoga Smid Cap is 1.07 times less risky than Df Dent. It trades about -0.07 of its potential returns per unit of risk. Df Dent Small is currently generating about -0.11 per unit of risk. If you would invest  2,563  in Conestoga Smid Cap on December 29, 2024 and sell it today you would lose (116.00) from holding Conestoga Smid Cap or give up 4.53% of portfolio value over 90 days.

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

Conestoga Smid Cap  vs.  Df Dent Small

Conestoga Smid Cap

Risk-Adjusted Performance

Very Weak

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

Df Dent Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Df Dent Small 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 Conestoga Smid and Df Dent

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

The idea behind Conestoga Smid Cap and Df Dent Small 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.