Correlation Between Dana Large and Small-cap Value

Can any of the company-specific risk be diversified away by investing in both Dana Large and Small-cap Value 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 Small-cap Value 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 Small Cap Value Fund, you can compare the effects of market volatilities on Dana Large and Small-cap Value 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 Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana Large and Small-cap Value.

Diversification Opportunities for Dana Large and Small-cap Value

0.61

Correlation Coefficient

Dana Large  Small-cap Value

Poor diversification

The 3 months correlation between Dana and Small-cap is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dana Large Cap and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Small-cap Value. 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 Value has no effect on the direction of Dana Large i.e., Dana Large and Small-cap Value go up and down completely randomly.

Pair Corralation between Dana Large and Small-cap Value

Assuming the 90 days horizon Dana Large Cap is expected to under-perform the Small-cap Value. In addition to that, Dana Large is 2.17 times more volatile than Small Cap Value Fund. It trades about -0.15 of its total potential returns per unit of risk. Small Cap Value Fund is currently generating about -0.26 per unit of volatility. If you would invest  4,369  in Small Cap Value Fund on October 7, 2024 and sell it today you would lose (618.00) from holding Small Cap Value Fund or give up 14.15% of portfolio value over 90 days.

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

Dana Large Cap  vs.  Small Cap Value Fund

Dana Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dana Large 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 forward 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.

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Small-cap Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dana Large and Small-cap Value

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

The idea behind Dana Large Cap and Small Cap Value Fund 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 Stocks Directory module to find actively traded stocks across global markets.