Correlation Between Us Small and Swan Defined

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

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

Diversification Opportunities for Us Small and Swan Defined

0.14

Correlation Coefficient

Us Small  Swan Defined

Average diversification

The 3 months correlation between DFSVX and Swan is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Swan Defined Risk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swan Defined Risk and Us 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 Us Small Cap are associated (or correlated) with Swan Defined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swan Defined Risk has no effect on the direction of Us Small i.e., Us Small and Swan Defined go up and down completely randomly.

Pair Corralation between Us Small and Swan Defined

Assuming the 90 days horizon Us Small Cap is expected to generate 1.59 times more return on investment than Swan Defined. However, Us Small is 1.59 times more volatile than Swan Defined Risk. It trades about 0.04 of its potential returns per unit of risk. Swan Defined Risk is currently generating about 0.0 per unit of risk. If you would invest  3,588  in Us Small Cap on December 11, 2024 and sell it today you would earn a total of  829.00  from holding Us Small Cap or generate 23.1% return on investment over 90 days.

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

Us Small Cap  vs.  Swan Defined Risk

Us Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Small Cap 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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Swan Defined Risk

Risk-Adjusted Performance

Very Weak

Over the last 90 days Swan Defined Risk has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental 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 Us Small and Swan Defined

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

The idea behind Us Small Cap and Swan Defined Risk 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.