Correlation Between Pzena International and Pzena Mid

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

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

Diversification Opportunities for Pzena International and Pzena Mid

-0.54

Correlation Coefficient

Pzena International  Pzena Mid

Excellent diversification

The 3 months correlation between Pzena and PZENA is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pzena International Value and Pzena Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pzena Mid Cap and Pzena International 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 International Value are associated (or correlated) with Pzena Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pzena Mid Cap has no effect on the direction of Pzena International i.e., Pzena International and Pzena Mid go up and down completely randomly.

Pair Corralation between Pzena International and Pzena Mid

Assuming the 90 days horizon Pzena International Value is expected to generate 1.09 times more return on investment than Pzena Mid. However, Pzena International is 1.09 times more volatile than Pzena Mid Cap. It trades about 0.19 of its potential returns per unit of risk. Pzena Mid Cap is currently generating about -0.04 per unit of risk. If you would invest  1,010  in Pzena International Value on December 27, 2024 and sell it today you would earn a total of  131.00  from holding Pzena International Value or generate 12.97% return on investment over 90 days.

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

Pzena International Value  vs.  Pzena Mid Cap

Pzena International Value

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pzena International Value are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pzena International showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Pzena International and Pzena Mid

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

The idea behind Pzena International Value and Pzena Mid 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..