Correlation Between Hodges Small and Matthew 25

Can any of the company-specific risk be diversified away by investing in both Hodges Small and Matthew 25 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 Matthew 25 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 Matthew 25 Fund, you can compare the effects of market volatilities on Hodges Small and Matthew 25 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 Matthew 25. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hodges Small and Matthew 25.

Diversification Opportunities for Hodges Small and Matthew 25

0.95

Correlation Coefficient

Hodges Small  Matthew 25

Almost no diversification

The 3 months correlation between Hodges and Matthew is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Hodges Small Cap and Matthew 25 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matthew 25 Fund 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 Matthew 25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matthew 25 Fund has no effect on the direction of Hodges Small i.e., Hodges Small and Matthew 25 go up and down completely randomly.

Pair Corralation between Hodges Small and Matthew 25

Assuming the 90 days horizon Hodges Small Cap is expected to under-perform the Matthew 25. But the mutual fund apears to be less risky and, when comparing its historical volatility, Hodges Small Cap is 1.15 times less risky than Matthew 25. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Matthew 25 Fund is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  3,485  in Matthew 25 Fund on December 29, 2024 and sell it today you would lose (404.00) from holding Matthew 25 Fund or give up 11.59% of portfolio value over 90 days.

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

Hodges Small Cap  vs.  Matthew 25 Fund

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.

Matthew 25 Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthew 25 Fund 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.

Pair Trading with Hodges Small and Matthew 25

The main advantage of trading using opposite Hodges Small and Matthew 25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hodges Small position performs unexpectedly, Matthew 25 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 Matthew 25 will offset losses from the drop in Matthew 25's long position.

The idea behind Hodges Small Cap and Matthew 25 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.