Correlation Between Pzena Small and Us Government

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

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

Diversification Opportunities for Pzena Small and Us Government

0.44

Correlation Coefficient

Pzena Small  Us Government

Very weak diversification

The 3 months correlation between Pzena and RGVEX is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Pzena Small Cap and Us Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Securities and Pzena Small 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 Small Cap are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Securities has no effect on the direction of Pzena Small i.e., Pzena Small and Us Government go up and down completely randomly.

Pair Corralation between Pzena Small and Us Government

Assuming the 90 days horizon Pzena Small Cap is expected to under-perform the Us Government. In addition to that, Pzena Small is 3.91 times more volatile than Us Government Securities. It trades about -0.33 of its total potential returns per unit of risk. Us Government Securities is currently generating about 0.34 per unit of volatility. If you would invest  1,178  in Us Government Securities on December 4, 2024 and sell it today you would earn a total of  25.00  from holding Us Government Securities or generate 2.12% return on investment over 90 days.

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

Pzena Small Cap  vs.  Us Government Securities

Pzena Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pzena Small 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 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.

Us Government Securities

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Us Government Securities are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Us Government 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 Small and Us Government

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

The idea behind Pzena Small Cap and Us Government Securities 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.