Correlation Between VictoryShares Small and American Sierra

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

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

Diversification Opportunities for VictoryShares Small and American Sierra

0.28

Correlation Coefficient

VictoryShares Small  American Sierra

Modest diversification

The 3 months correlation between VictoryShares and American is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding VictoryShares Small Cap and American Sierra Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Sierra Gold and VictoryShares 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 VictoryShares Small Cap are associated (or correlated) with American Sierra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Sierra Gold has no effect on the direction of VictoryShares Small i.e., VictoryShares Small and American Sierra go up and down completely randomly.

Pair Corralation between VictoryShares Small and American Sierra

Considering the 90-day investment horizon VictoryShares Small Cap is expected to under-perform the American Sierra. But the etf apears to be less risky and, when comparing its historical volatility, VictoryShares Small Cap is 24.39 times less risky than American Sierra. The etf trades about -0.05 of its potential returns per unit of risk. The American Sierra Gold is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.50  in American Sierra Gold on December 29, 2024 and sell it today you would lose (0.07) from holding American Sierra Gold or give up 14.0% of portfolio value over 90 days.

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

VictoryShares Small Cap  vs.  American Sierra Gold

VictoryShares Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days VictoryShares Small Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VictoryShares Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

American Sierra Gold

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in American Sierra Gold are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, American Sierra reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with VictoryShares Small and American Sierra

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

The idea behind VictoryShares Small Cap and American Sierra Gold 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 Transaction History module to view history of all your transactions and understand their impact on performance.