Correlation Between Matthew 25 and Walthausen Small

Can any of the company-specific risk be diversified away by investing in both Matthew 25 and Walthausen 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 Matthew 25 and Walthausen Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Matthew 25 Fund and Walthausen Small Cap, you can compare the effects of market volatilities on Matthew 25 and Walthausen 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 Matthew 25 with a short position of Walthausen Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matthew 25 and Walthausen Small.

Diversification Opportunities for Matthew 25 and Walthausen Small

0.75

Correlation Coefficient

Matthew 25  Walthausen Small

Poor diversification

The 3 months correlation between Matthew and Walthausen is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Matthew 25 Fund and Walthausen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walthausen Small Cap and Matthew 25 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 Matthew 25 Fund are associated (or correlated) with Walthausen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walthausen Small Cap has no effect on the direction of Matthew 25 i.e., Matthew 25 and Walthausen Small go up and down completely randomly.

Pair Corralation between Matthew 25 and Walthausen Small

Assuming the 90 days horizon Matthew 25 Fund is expected to under-perform the Walthausen Small. In addition to that, Matthew 25 is 1.56 times more volatile than Walthausen Small Cap. It trades about -0.11 of its total potential returns per unit of risk. Walthausen Small Cap is currently generating about -0.09 per unit of volatility. If you would invest  1,441  in Walthausen Small Cap on December 30, 2024 and sell it today you would lose (86.00) from holding Walthausen Small Cap or give up 5.97% of portfolio value over 90 days.

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

Matthew 25 Fund  vs.  Walthausen Small Cap

Matthew 25 Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matthew 25 Fund 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.

Walthausen Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walthausen Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Walthausen 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 Matthew 25 and Walthausen Small

The main advantage of trading using opposite Matthew 25 and Walthausen Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matthew 25 position performs unexpectedly, Walthausen 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 Walthausen Small will offset losses from the drop in Walthausen Small's long position.

The idea behind Matthew 25 Fund and Walthausen 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.