Correlation Between Driehaus Micro and Emerald Growth

Can any of the company-specific risk be diversified away by investing in both Driehaus Micro and Emerald Growth 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 Emerald Growth 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 Emerald Growth Fund, you can compare the effects of market volatilities on Driehaus Micro and Emerald Growth 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 Emerald Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Driehaus Micro and Emerald Growth.

Diversification Opportunities for Driehaus Micro and Emerald Growth

0.99

Correlation Coefficient

Driehaus Micro  Emerald Growth

No risk reduction

The 3 months correlation between Driehaus and Emerald is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Driehaus Micro Cap and Emerald Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Growth 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 Emerald Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Growth has no effect on the direction of Driehaus Micro i.e., Driehaus Micro and Emerald Growth go up and down completely randomly.

Pair Corralation between Driehaus Micro and Emerald Growth

Assuming the 90 days horizon Driehaus Micro Cap is expected to generate 1.31 times more return on investment than Emerald Growth. However, Driehaus Micro is 1.31 times more volatile than Emerald Growth Fund. It trades about 0.04 of its potential returns per unit of risk. Emerald Growth Fund is currently generating about -0.01 per unit of risk. If you would invest  1,543  in Driehaus Micro Cap on September 13, 2024 and sell it today you would earn a total of  16.00  from holding Driehaus Micro Cap or generate 1.04% return on investment over 90 days.

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

Driehaus Micro Cap  vs.  Emerald Growth Fund

Driehaus Micro Cap

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Driehaus Micro Cap are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Driehaus Micro showed solid returns over the last few months and may actually be approaching a breakup point.

Emerald Growth

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Growth Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Emerald Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Driehaus Micro and Emerald Growth

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

The idea behind Driehaus Micro Cap and Emerald Growth 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.