Correlation Between Small Pany and Focused Dynamic

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

By analyzing existing cross correlation between Small Pany Growth and Focused Dynamic Growth, you can compare the effects of market volatilities on Small Pany and Focused Dynamic 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 Pany with a short position of Focused Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Pany and Focused Dynamic.

Diversification Opportunities for Small Pany and Focused Dynamic

0.95

Correlation Coefficient

Small Pany  Focused Dynamic

Almost no diversification

The 3 months correlation between Small and Focused is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Focused Dynamic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focused Dynamic Growth and Small Pany 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 Pany Growth are associated (or correlated) with Focused Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focused Dynamic Growth has no effect on the direction of Small Pany i.e., Small Pany and Focused Dynamic go up and down completely randomly.

Pair Corralation between Small Pany and Focused Dynamic

Assuming the 90 days horizon Small Pany Growth is expected to generate 1.2 times more return on investment than Focused Dynamic. However, Small Pany is 1.2 times more volatile than Focused Dynamic Growth. It trades about -0.07 of its potential returns per unit of risk. Focused Dynamic Growth is currently generating about -0.13 per unit of risk. If you would invest  1,059  in Small Pany Growth on December 29, 2024 and sell it today you would lose (115.00) from holding Small Pany Growth or give up 10.86% of portfolio value over 90 days.

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

Small Pany Growth  vs.  Focused Dynamic Growth

Small Pany Growth

Risk-Adjusted Performance

Very Weak

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

Focused Dynamic Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Focused Dynamic Growth 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Small Pany and Focused Dynamic

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

The idea behind Small Pany Growth and Focused Dynamic 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.