Correlation Between Classic Value and Mesirow Financial

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

By analyzing existing cross correlation between Classic Value Fund and Mesirow Financial Small, you can compare the effects of market volatilities on Classic Value and Mesirow Financial 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 Classic Value with a short position of Mesirow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Classic Value and Mesirow Financial.

Diversification Opportunities for Classic Value and Mesirow Financial

0.83

Correlation Coefficient

Classic Value  Mesirow Financial

Very poor diversification

The 3 months correlation between Classic and Mesirow is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Classic Value Fund and Mesirow Financial Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mesirow Financial Small and Classic Value 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 Classic Value Fund are associated (or correlated) with Mesirow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mesirow Financial Small has no effect on the direction of Classic Value i.e., Classic Value and Mesirow Financial go up and down completely randomly.

Pair Corralation between Classic Value and Mesirow Financial

Assuming the 90 days horizon Classic Value Fund is expected to under-perform the Mesirow Financial. In addition to that, Classic Value is 3.05 times more volatile than Mesirow Financial Small. It trades about -0.28 of its total potential returns per unit of risk. Mesirow Financial Small is currently generating about -0.25 per unit of volatility. If you would invest  1,439  in Mesirow Financial Small on October 5, 2024 and sell it today you would lose (181.00) from holding Mesirow Financial Small or give up 12.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Classic Value Fund  vs.  Mesirow Financial Small

Classic Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Classic Value Fund 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 February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Mesirow Financial Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mesirow Financial Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Classic Value and Mesirow Financial

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

The idea behind Classic Value Fund and Mesirow Financial Small 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.