Correlation Between Df Dent and Conestoga Smid

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

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

Diversification Opportunities for Df Dent and Conestoga Smid

0.97

Correlation Coefficient

Df Dent  Conestoga Smid

Almost no diversification

The 3 months correlation between DFDMX and Conestoga is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Df Dent Midcap 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 Df Dent 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 Df Dent Midcap 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 Df Dent i.e., Df Dent and Conestoga Smid go up and down completely randomly.

Pair Corralation between Df Dent and Conestoga Smid

Assuming the 90 days horizon Df Dent is expected to generate 1.34 times less return on investment than Conestoga Smid. But when comparing it to its historical volatility, Df Dent Midcap is 1.16 times less risky than Conestoga Smid. It trades about 0.28 of its potential returns per unit of risk. Conestoga Smid Cap is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest  2,553  in Conestoga Smid Cap on September 5, 2024 and sell it today you would earn a total of  229.00  from holding Conestoga Smid Cap or generate 8.97% return on investment over 90 days.

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

Df Dent Midcap  vs.  Conestoga Smid Cap

Df Dent Midcap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Df Dent Midcap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Df Dent may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Df Dent and Conestoga Smid

The main advantage of trading using opposite Df Dent and Conestoga Smid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Df Dent 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 Df Dent Midcap 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .