Correlation Between Hodges Small and Hodges Fund

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

Diversification Opportunities for Hodges Small and Hodges Fund

0.85

Correlation Coefficient

Hodges Small  Hodges Fund

Very poor diversification

The 3 months correlation between Hodges and Hodges is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hodges Small Cap and Hodges Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hodges Fund Retail 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 Hodges Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hodges Fund Retail has no effect on the direction of Hodges Small i.e., Hodges Small and Hodges Fund go up and down completely randomly.

Pair Corralation between Hodges Small and Hodges Fund

Assuming the 90 days horizon Hodges Small Cap is expected to under-perform the Hodges Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Hodges Small Cap is 1.44 times less risky than Hodges Fund. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Hodges Fund Retail is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  6,867  in Hodges Fund Retail on December 29, 2024 and sell it today you would lose (418.00) from holding Hodges Fund Retail or give up 6.09% of portfolio value over 90 days.

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

Hodges Small Cap  vs.  Hodges Fund Retail

Hodges Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hodges Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Hodges Fund Retail

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hodges Small and Hodges Fund

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

The idea behind Hodges Small Cap and Hodges Fund Retail 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..