Correlation Between Congress Mid and Century Small

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

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

Diversification Opportunities for Congress Mid and Century Small

0.94

Correlation Coefficient

Congress Mid  Century Small

Almost no diversification

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

Pair Corralation between Congress Mid and Century Small

Assuming the 90 days horizon Congress Mid Cap is expected to under-perform the Century Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Congress Mid Cap is 1.07 times less risky than Century Small. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Century Small Cap is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  5,005  in Century Small Cap on September 11, 2024 and sell it today you would lose (105.00) from holding Century Small Cap or give up 2.1% of portfolio value over 90 days.

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

Congress Mid Cap  vs.  Century Small Cap

Congress Mid Cap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Congress Mid Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Congress Mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Century Small Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Small Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Century Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Congress Mid and Century Small

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

The idea behind Congress Mid Cap and Century Small 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.