Correlation Between Df Dent and Small Cap

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

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

Diversification Opportunities for Df Dent and Small Cap

0.63

Correlation Coefficient

Df Dent  Small Cap

Poor diversification

The 3 months correlation between DFDSX and Small is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Df Dent Small and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core 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 Small are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Df Dent i.e., Df Dent and Small Cap go up and down completely randomly.

Pair Corralation between Df Dent and Small Cap

Assuming the 90 days horizon Df Dent Small is expected to generate 0.78 times more return on investment than Small Cap. However, Df Dent Small is 1.28 times less risky than Small Cap. It trades about -0.41 of its potential returns per unit of risk. Small Cap Core is currently generating about -0.34 per unit of risk. If you would invest  2,611  in Df Dent Small on October 15, 2024 and sell it today you would lose (202.00) from holding Df Dent Small or give up 7.74% of portfolio value over 90 days.

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

Df Dent Small  vs.  Small Cap Core

Df Dent Small

Risk-Adjusted Performance

0 of 100

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 fairly strong basic indicators, Df Dent is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Df Dent and Small Cap

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

The idea behind Df Dent Small and Small Cap Core 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.