Correlation Between Marsico Focus and Royce Smaller-companie

Can any of the company-specific risk be diversified away by investing in both Marsico Focus and Royce Smaller-companie 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 Marsico Focus and Royce Smaller-companie into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marsico Focus Fund and Royce Smaller Companies Growth, you can compare the effects of market volatilities on Marsico Focus and Royce Smaller-companie 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 Marsico Focus with a short position of Royce Smaller-companie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marsico Focus and Royce Smaller-companie.

Diversification Opportunities for Marsico Focus and Royce Smaller-companie

0.98

Correlation Coefficient

Marsico Focus  Royce Smaller-companie

Almost no diversification

The 3 months correlation between Marsico and Royce is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Marsico Focus Fund and Royce Smaller Companies Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Smaller Companies and Marsico Focus 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 Marsico Focus Fund are associated (or correlated) with Royce Smaller-companie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Smaller Companies has no effect on the direction of Marsico Focus i.e., Marsico Focus and Royce Smaller-companie go up and down completely randomly.

Pair Corralation between Marsico Focus and Royce Smaller-companie

Assuming the 90 days horizon Marsico Focus Fund is expected to under-perform the Royce Smaller-companie. In addition to that, Marsico Focus is 1.04 times more volatile than Royce Smaller Companies Growth. It trades about -0.1 of its total potential returns per unit of risk. Royce Smaller Companies Growth is currently generating about -0.1 per unit of volatility. If you would invest  761.00  in Royce Smaller Companies Growth on December 29, 2024 and sell it today you would lose (68.00) from holding Royce Smaller Companies Growth or give up 8.94% of portfolio value over 90 days.

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

Marsico Focus Fund  vs.  Royce Smaller Companies Growth

Marsico Focus

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marsico Focus Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Royce Smaller Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Smaller Companies Growth 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 Marsico Focus and Royce Smaller-companie

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

The idea behind Marsico Focus Fund and Royce Smaller Companies Growth 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.