Correlation Between Janus Overseas and Small Cap

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

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

Diversification Opportunities for Janus Overseas and Small Cap

-0.59

Correlation Coefficient

Janus Overseas  Small Cap

Excellent diversification

The 3 months correlation between Janus and Small is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Janus Overseas Fund and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Janus Overseas 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 Janus Overseas Fund are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Stock has no effect on the direction of Janus Overseas i.e., Janus Overseas and Small Cap go up and down completely randomly.

Pair Corralation between Janus Overseas and Small Cap

Assuming the 90 days horizon Janus Overseas Fund is expected to generate 0.81 times more return on investment than Small Cap. However, Janus Overseas Fund is 1.24 times less risky than Small Cap. It trades about 0.14 of its potential returns per unit of risk. Small Cap Stock is currently generating about -0.11 per unit of risk. If you would invest  4,562  in Janus Overseas Fund on December 26, 2024 and sell it today you would earn a total of  351.00  from holding Janus Overseas Fund or generate 7.69% return on investment over 90 days.

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

Janus Overseas Fund  vs.  Small Cap Stock

Janus Overseas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Janus Overseas Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Janus Overseas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Small Cap Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Stock 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.

Pair Trading with Janus Overseas and Small Cap

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

The idea behind Janus Overseas Fund and Small Cap Stock 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.