Correlation Between Intrepid Capital and Investment

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

By analyzing existing cross correlation between Intrepid Capital Fund and Investment Of America, you can compare the effects of market volatilities on Intrepid Capital and Investment 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 Intrepid Capital with a short position of Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intrepid Capital and Investment.

Diversification Opportunities for Intrepid Capital and Investment

0.95

Correlation Coefficient

Intrepid Capital  Investment

Almost no diversification

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

Pair Corralation between Intrepid Capital and Investment

Assuming the 90 days horizon Intrepid Capital Fund is expected to generate 0.69 times more return on investment than Investment. However, Intrepid Capital Fund is 1.44 times less risky than Investment. It trades about -0.02 of its potential returns per unit of risk. Investment Of America is currently generating about -0.06 per unit of risk. If you would invest  1,265  in Intrepid Capital Fund on December 30, 2024 and sell it today you would lose (14.00) from holding Intrepid Capital Fund or give up 1.11% of portfolio value over 90 days.

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

Intrepid Capital Fund  vs.  Investment Of America

Intrepid Capital

Risk-Adjusted Performance

Very Weak

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

Investment Of America

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Intrepid Capital and Investment

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

The idea behind Intrepid Capital Fund and Investment Of America 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.