Correlation Between Pzena Mid and Pzena International

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

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

Diversification Opportunities for Pzena Mid and Pzena International

0.87

Correlation Coefficient

Pzena Mid  Pzena International

Very poor diversification

The 3 months correlation between Pzena and Pzena is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Pzena Mid Cap and Pzena International Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena International Small and Pzena Mid 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 Pzena Mid Cap are associated (or correlated) with Pzena International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena International Small has no effect on the direction of Pzena Mid i.e., Pzena Mid and Pzena International go up and down completely randomly.

Pair Corralation between Pzena Mid and Pzena International

Assuming the 90 days horizon Pzena Mid Cap is expected to under-perform the Pzena International. In addition to that, Pzena Mid is 1.71 times more volatile than Pzena International Small. It trades about -0.19 of its total potential returns per unit of risk. Pzena International Small is currently generating about -0.08 per unit of volatility. If you would invest  1,169  in Pzena International Small on December 4, 2024 and sell it today you would lose (79.00) from holding Pzena International Small or give up 6.76% of portfolio value over 90 days.

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

Pzena Mid Cap  vs.  Pzena International Small

Pzena Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pzena Mid Cap 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 primary 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.

Pzena International Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pzena International Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward 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 Pzena Mid and Pzena International

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

The idea behind Pzena Mid Cap and Pzena 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 Transaction History module to view history of all your transactions and understand their impact on performance.