Correlation Between Pzena Small and Pzena Emerging

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

Diversification Opportunities for Pzena Small and Pzena Emerging

-0.7

Correlation Coefficient

Pzena Small  Pzena Emerging

Excellent diversification

The 3 months correlation between Pzena and Pzena is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Pzena Small 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 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 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 Small i.e., Pzena Small and Pzena Emerging go up and down completely randomly.

Pair Corralation between Pzena Small and Pzena Emerging

Assuming the 90 days horizon Pzena Small Cap is expected to under-perform the Pzena Emerging. In addition to that, Pzena Small is 1.62 times more volatile than Pzena Emerging Markets. It trades about -0.15 of its total potential returns per unit of risk. Pzena Emerging Markets is currently generating about 0.15 per unit of volatility. If you would invest  1,196  in Pzena Emerging Markets on December 26, 2024 and sell it today you would earn a total of  83.00  from holding Pzena Emerging Markets or generate 6.94% return on investment over 90 days.

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

Pzena Small Cap  vs.  Pzena Emerging Markets

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund 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 11 (%) 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 Small and Pzena Emerging

The main advantage of trading using opposite Pzena Small and Pzena Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pzena Small 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 Small 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.