Correlation Between Us Small and Conservative Strategy

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

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

Diversification Opportunities for Us Small and Conservative Strategy

0.36

Correlation Coefficient

Us Small  Conservative Strategy

Weak diversification

The 3 months correlation between RSCRX and CONSERVATIVE is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Conservative Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conservative Strategy and Us 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 Us Small Cap are associated (or correlated) with Conservative Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conservative Strategy has no effect on the direction of Us Small i.e., Us Small and Conservative Strategy go up and down completely randomly.

Pair Corralation between Us Small and Conservative Strategy

Assuming the 90 days horizon Us Small is expected to generate 1.09 times less return on investment than Conservative Strategy. In addition to that, Us Small is 3.54 times more volatile than Conservative Strategy Fund. It trades about 0.02 of its total potential returns per unit of risk. Conservative Strategy Fund is currently generating about 0.07 per unit of volatility. If you would invest  797.00  in Conservative Strategy Fund on December 2, 2024 and sell it today you would earn a total of  107.00  from holding Conservative Strategy Fund or generate 13.43% return on investment over 90 days.

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

Us Small Cap  vs.  Conservative Strategy Fund

Us Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us 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.

Conservative Strategy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Conservative Strategy Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Conservative Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Us Small and Conservative Strategy

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

The idea behind Us Small Cap and Conservative Strategy Fund 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.