Correlation Between Mm Sp and Adirondack Small

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

By analyzing existing cross correlation between Mm Sp 500 and Adirondack Small Cap, you can compare the effects of market volatilities on Mm Sp and Adirondack 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 Mm Sp with a short position of Adirondack Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mm Sp and Adirondack Small.

Diversification Opportunities for Mm Sp and Adirondack Small

0.91

Correlation Coefficient

Mm Sp  Adirondack Small

Almost no diversification

The 3 months correlation between MIEYX and Adirondack is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Mm Sp 500 and Adirondack Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adirondack Small Cap and Mm Sp 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 Mm Sp 500 are associated (or correlated) with Adirondack Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adirondack Small Cap has no effect on the direction of Mm Sp i.e., Mm Sp and Adirondack Small go up and down completely randomly.

Pair Corralation between Mm Sp and Adirondack Small

Assuming the 90 days horizon Mm Sp 500 is expected to under-perform the Adirondack Small. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mm Sp 500 is 1.04 times less risky than Adirondack Small. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Adirondack Small Cap is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,139  in Adirondack Small Cap on December 30, 2024 and sell it today you would lose (159.00) from holding Adirondack Small Cap or give up 5.07% of portfolio value over 90 days.

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

Mm Sp 500  vs.  Adirondack Small Cap

Mm Sp 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mm Sp 500 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Mm Sp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Adirondack Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adirondack Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Adirondack 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 Mm Sp and Adirondack Small

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

The idea behind Mm Sp 500 and Adirondack 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..