Correlation Between Smallcap Growth and Avantis International

Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Avantis International 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 Smallcap Growth and Avantis International into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Smallcap Growth and Avantis International

-0.11

Correlation Coefficient

Smallcap Growth  Avantis International

Good diversification

The 3 months correlation between Smallcap and Avantis is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Avantis International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis International and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Avantis International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis International has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Avantis International go up and down completely randomly.

Pair Corralation between Smallcap Growth and Avantis International

Assuming the 90 days horizon Smallcap Growth Fund is expected to under-perform the Avantis International. In addition to that, Smallcap Growth is 2.06 times more volatile than Avantis International Small. It trades about -0.18 of its total potential returns per unit of risk. Avantis International Small is currently generating about 0.06 per unit of volatility. If you would invest  1,241  in Avantis International Small on December 2, 2024 and sell it today you would earn a total of  34.00  from holding Avantis International Small or generate 2.74% return on investment over 90 days.

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

Smallcap Growth Fund  vs.  Avantis International Small

Smallcap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smallcap Growth Fund 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.

Avantis International

Risk-Adjusted Performance

Modest

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

Pair Trading with Smallcap Growth and Avantis International

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

The idea behind Smallcap Growth Fund and Avantis International Small 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.