Correlation Between Dana Large and Artisan Small

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

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

Diversification Opportunities for Dana Large and Artisan Small

0.93

Correlation Coefficient

Dana Large  Artisan Small

Almost no diversification

The 3 months correlation between Dana and Artisan is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dana Large Cap and Artisan Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Small Cap and Dana Large 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 Dana Large Cap are associated (or correlated) with Artisan Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Small Cap has no effect on the direction of Dana Large i.e., Dana Large and Artisan Small go up and down completely randomly.

Pair Corralation between Dana Large and Artisan Small

Assuming the 90 days horizon Dana Large is expected to generate 1.62 times less return on investment than Artisan Small. But when comparing it to its historical volatility, Dana Large Cap is 1.6 times less risky than Artisan Small. It trades about 0.17 of its potential returns per unit of risk. Artisan Small Cap is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,686  in Artisan Small Cap on September 4, 2024 and sell it today you would earn a total of  331.00  from holding Artisan Small Cap or generate 8.98% return on investment over 90 days.

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

Dana Large Cap  vs.  Artisan Small Cap

Dana Large Cap

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dana Large Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Dana Large may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Artisan Small Cap

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan Small Cap are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Artisan Small showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dana Large and Artisan Small

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

The idea behind Dana Large Cap and Artisan Small 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.