Correlation Between Resq Dynamic and Century Small

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

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

Diversification Opportunities for Resq Dynamic and Century Small

0.76

Correlation Coefficient

Resq Dynamic  Century Small

Poor diversification

The 3 months correlation between Resq and Century is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Resq Dynamic Allocation and Century Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Small Cap and Resq Dynamic 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 Resq Dynamic Allocation are associated (or correlated) with Century Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Small Cap has no effect on the direction of Resq Dynamic i.e., Resq Dynamic and Century Small go up and down completely randomly.

Pair Corralation between Resq Dynamic and Century Small

Assuming the 90 days horizon Resq Dynamic Allocation is expected to generate 1.13 times more return on investment than Century Small. However, Resq Dynamic is 1.13 times more volatile than Century Small Cap. It trades about 0.19 of its potential returns per unit of risk. Century Small Cap is currently generating about 0.12 per unit of risk. If you would invest  962.00  in Resq Dynamic Allocation on September 15, 2024 and sell it today you would earn a total of  157.00  from holding Resq Dynamic Allocation or generate 16.32% return on investment over 90 days.

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

Resq Dynamic Allocation  vs.  Century Small Cap

Resq Dynamic Allocation

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Resq Dynamic Allocation are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Resq Dynamic showed solid returns over the last few months and may actually be approaching a breakup point.

Century Small Cap

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Century Small Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Century Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Resq Dynamic and Century Small

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

The idea behind Resq Dynamic Allocation and Century Small 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.