Correlation Between Forty Portfolio and Perkins Small

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

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

Diversification Opportunities for Forty Portfolio and Perkins Small

0.89

Correlation Coefficient

Forty Portfolio  Perkins Small

Very poor diversification

The 3 months correlation between Forty and Perkins is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Forty Portfolio Institutional and Perkins Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perkins Small Cap and Forty Portfolio 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 Forty Portfolio Institutional are associated (or correlated) with Perkins Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perkins Small Cap has no effect on the direction of Forty Portfolio i.e., Forty Portfolio and Perkins Small go up and down completely randomly.

Pair Corralation between Forty Portfolio and Perkins Small

Assuming the 90 days horizon Forty Portfolio Institutional is expected to under-perform the Perkins Small. In addition to that, Forty Portfolio is 1.25 times more volatile than Perkins Small Cap. It trades about -0.1 of its total potential returns per unit of risk. Perkins Small Cap is currently generating about -0.08 per unit of volatility. If you would invest  2,340  in Perkins Small Cap on December 29, 2024 and sell it today you would lose (127.00) from holding Perkins Small Cap or give up 5.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Forty Portfolio Institutional  vs.  Perkins Small Cap

Forty Portfolio Inst

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forty Portfolio Institutional 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.

Perkins Small Cap

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Forty Portfolio and Perkins Small

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

The idea behind Forty Portfolio Institutional and Perkins 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.

Check out your portfolio center.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.