Correlation Between Driehaus Micro and Driehaus Event

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

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

Diversification Opportunities for Driehaus Micro and Driehaus Event

0.95

Correlation Coefficient

Driehaus Micro  Driehaus Event

Almost no diversification

The 3 months correlation between Driehaus and Driehaus is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Driehaus Micro Cap and Driehaus Event Driven in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driehaus Event Driven and Driehaus Micro 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 Driehaus Micro Cap are associated (or correlated) with Driehaus Event. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driehaus Event Driven has no effect on the direction of Driehaus Micro i.e., Driehaus Micro and Driehaus Event go up and down completely randomly.

Pair Corralation between Driehaus Micro and Driehaus Event

Assuming the 90 days horizon Driehaus Micro Cap is expected to under-perform the Driehaus Event. In addition to that, Driehaus Micro is 5.7 times more volatile than Driehaus Event Driven. It trades about -0.2 of its total potential returns per unit of risk. Driehaus Event Driven is currently generating about -0.26 per unit of volatility. If you would invest  1,283  in Driehaus Event Driven on November 28, 2024 and sell it today you would lose (58.00) from holding Driehaus Event Driven or give up 4.52% of portfolio value over 90 days.

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

Driehaus Micro Cap  vs.  Driehaus Event Driven

Driehaus Micro Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Driehaus Micro 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 March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Driehaus Event Driven

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Driehaus Micro and Driehaus Event

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

The idea behind Driehaus Micro Cap and Driehaus Event Driven 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.

Check out your portfolio center.

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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.