Correlation Between Hodges Small and Eventide Gilead

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

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

Diversification Opportunities for Hodges Small and Eventide Gilead

0.93

Correlation Coefficient

Hodges Small  Eventide Gilead

Almost no diversification

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

Pair Corralation between Hodges Small and Eventide Gilead

Assuming the 90 days horizon Hodges Small Cap is expected to generate 1.22 times more return on investment than Eventide Gilead. However, Hodges Small is 1.22 times more volatile than Eventide Gilead Fund. It trades about 0.23 of its potential returns per unit of risk. Eventide Gilead Fund is currently generating about 0.17 per unit of risk. If you would invest  2,220  in Hodges Small Cap on September 3, 2024 and sell it today you would earn a total of  397.00  from holding Hodges Small Cap or generate 17.88% return on investment over 90 days.

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

Hodges Small Cap  vs.  Eventide Gilead Fund

Hodges Small Cap

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hodges Small Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hodges Small showed solid returns over the last few months and may actually be approaching a breakup point.

Eventide Gilead

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eventide Gilead Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Eventide Gilead may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hodges Small and Eventide Gilead

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

The idea behind Hodges Small Cap and Eventide Gilead 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.