Correlation Between Hood River and Manager Directed

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

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

Diversification Opportunities for Hood River and Manager Directed

0.85

Correlation Coefficient

Hood River  Manager Directed

Very poor diversification

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

Pair Corralation between Hood River and Manager Directed

Assuming the 90 days horizon Hood River Small Cap is expected to generate 1.29 times more return on investment than Manager Directed. However, Hood River is 1.29 times more volatile than Manager Directed Portfolios. It trades about 0.09 of its potential returns per unit of risk. Manager Directed Portfolios is currently generating about 0.1 per unit of risk. If you would invest  4,921  in Hood River Small Cap on September 4, 2024 and sell it today you would earn a total of  3,569  from holding Hood River Small Cap or generate 72.53% return on investment over 90 days.

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

Hood River Small Cap  vs.  Manager Directed Portfolios

Hood River Small

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hood River Small Cap are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Hood River showed solid returns over the last few months and may actually be approaching a breakup point.

Manager Directed Por

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Manager Directed Portfolios are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Manager Directed may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hood River and Manager Directed

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

The idea behind Hood River Small Cap and Manager Directed Portfolios 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.