Correlation Between Small Cap and Artisan High

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

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

Diversification Opportunities for Small Cap and Artisan High

0.51

Correlation Coefficient

Small Cap  Artisan High

Very weak diversification

The 3 months correlation between Small and Artisan is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Artisan High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan High Income and Small Cap 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 Small Cap Value Series are associated (or correlated) with Artisan High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan High Income has no effect on the direction of Small Cap i.e., Small Cap and Artisan High go up and down completely randomly.

Pair Corralation between Small Cap and Artisan High

Assuming the 90 days horizon Small Cap Value Series is expected to under-perform the Artisan High. In addition to that, Small Cap is 14.87 times more volatile than Artisan High Income. It trades about -0.31 of its total potential returns per unit of risk. Artisan High Income is currently generating about -0.29 per unit of volatility. If you would invest  921.00  in Artisan High Income on October 9, 2024 and sell it today you would lose (8.00) from holding Artisan High Income or give up 0.87% of portfolio value over 90 days.

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

Small Cap Value Series  vs.  Artisan High Income

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Artisan High Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan High Income are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Artisan High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Artisan High

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

The idea behind Small Cap Value Series and Artisan High Income 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.