Correlation Between Pzena Mid and Pzena Emerging

Can any of the company-specific risk be diversified away by investing in both Pzena Mid and Pzena Emerging 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 Emerging 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 Emerging Markets, you can compare the effects of market volatilities on Pzena Mid and Pzena Emerging 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 Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pzena Mid and Pzena Emerging.

Diversification Opportunities for Pzena Mid and Pzena Emerging

-0.47

Correlation Coefficient

Pzena Mid  Pzena Emerging

Very good diversification

The 3 months correlation between Pzena and Pzena is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Pzena Mid Cap and Pzena Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena Emerging Markets 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 Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena Emerging Markets has no effect on the direction of Pzena Mid i.e., Pzena Mid and Pzena Emerging go up and down completely randomly.

Pair Corralation between Pzena Mid and Pzena Emerging

Assuming the 90 days horizon Pzena Mid Cap is expected to under-perform the Pzena Emerging. In addition to that, Pzena Mid is 1.27 times more volatile than Pzena Emerging Markets. It trades about -0.04 of its total potential returns per unit of risk. Pzena Emerging Markets is currently generating about 0.16 per unit of volatility. If you would invest  1,190  in Pzena Emerging Markets on December 27, 2024 and sell it today you would earn a total of  93.00  from holding Pzena Emerging Markets or generate 7.82% return on investment over 90 days.

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

Pzena Mid Cap  vs.  Pzena Emerging Markets

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 fairly strong primary indicators, Pzena Mid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pzena Emerging Markets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pzena Emerging Markets are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Pzena Emerging may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Pzena Mid and Pzena Emerging

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

The idea behind Pzena Mid Cap and Pzena Emerging Markets 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.