Correlation Between Century Small and Hood River

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

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

Diversification Opportunities for Century Small and Hood River

0.95

Correlation Coefficient

Century Small  Hood River

Almost no diversification

The 3 months correlation between Century and Hood is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Century Small Cap and Hood River New in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hood River New and Century 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 Century Small Cap are associated (or correlated) with Hood River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hood River New has no effect on the direction of Century Small i.e., Century Small and Hood River go up and down completely randomly.

Pair Corralation between Century Small and Hood River

Assuming the 90 days horizon Century Small Cap is expected to generate 0.69 times more return on investment than Hood River. However, Century Small Cap is 1.45 times less risky than Hood River. It trades about -0.09 of its potential returns per unit of risk. Hood River New is currently generating about -0.09 per unit of risk. If you would invest  4,011  in Century Small Cap on December 28, 2024 and sell it today you would lose (298.00) from holding Century Small Cap or give up 7.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Century Small Cap  vs.  Hood River New

Century Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Century Small Cap 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.

Hood River New

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hood River New 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 Century Small and Hood River

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

The idea behind Century Small Cap and Hood River New 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.