Correlation Between Driehaus Small and Driehaus Small/mid

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

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

Diversification Opportunities for Driehaus Small and Driehaus Small/mid

0.98

Correlation Coefficient

Driehaus Small  Driehaus Small/mid

Almost no diversification

The 3 months correlation between Driehaus and Driehaus is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Driehaus Small Cap and Driehaus Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driehaus Smallmid Cap and Driehaus 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 Driehaus Small Cap are associated (or correlated) with Driehaus Small/mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driehaus Smallmid Cap has no effect on the direction of Driehaus Small i.e., Driehaus Small and Driehaus Small/mid go up and down completely randomly.

Pair Corralation between Driehaus Small and Driehaus Small/mid

Assuming the 90 days horizon Driehaus Small Cap is expected to under-perform the Driehaus Small/mid. In addition to that, Driehaus Small is 1.06 times more volatile than Driehaus Smallmid Cap. It trades about -0.19 of its total potential returns per unit of risk. Driehaus Smallmid Cap is currently generating about -0.18 per unit of volatility. If you would invest  2,066  in Driehaus Smallmid Cap on November 28, 2024 and sell it today you would lose (324.00) from holding Driehaus Smallmid Cap or give up 15.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.31%
Values	Daily Returns

Driehaus Small Cap  vs.  Driehaus Smallmid Cap

Driehaus Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Driehaus 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 primary 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 Smallmid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Driehaus Smallmid 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 fundamental 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.

Pair Trading with Driehaus Small and Driehaus Small/mid

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

The idea behind Driehaus Small Cap and Driehaus Smallmid 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.