Correlation Between Manager Directed and Hood River

Can any of the company-specific risk be diversified away by investing in both Manager Directed and Hood River 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 Manager Directed and Hood River into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Manager Directed and Hood River

0.76

Correlation Coefficient

Manager Directed  Hood River

Poor diversification

The 3 months correlation between Manager and Hood is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Manager Directed Portfolios and Hood River Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hood River Small and Manager Directed 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 Manager Directed Portfolios are associated (or correlated) with Hood River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hood River Small has no effect on the direction of Manager Directed i.e., Manager Directed and Hood River go up and down completely randomly.

Pair Corralation between Manager Directed and Hood River

Assuming the 90 days horizon Manager Directed Portfolios is expected to generate 0.86 times more return on investment than Hood River. However, Manager Directed Portfolios is 1.16 times less risky than Hood River. It trades about -0.1 of its potential returns per unit of risk. Hood River Small Cap is currently generating about -0.19 per unit of risk. If you would invest  1,210  in Manager Directed Portfolios on December 2, 2024 and sell it today you would lose (107.00) from holding Manager Directed Portfolios or give up 8.84% of portfolio value over 90 days.

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

Manager Directed Portfolios  vs.  Hood River Small Cap

Manager Directed Por

Risk-Adjusted Performance

Very Weak

Over the last 90 days Manager Directed Portfolios 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.

Hood River Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hood River 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 forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Manager Directed and Hood River

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

The idea behind Manager Directed Portfolios and Hood River Small 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.

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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 Global Correlations module to find global opportunities by holding instruments from different markets.