Correlation Between Royce Small-cap and Scharf Fund

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

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

Diversification Opportunities for Royce Small-cap and Scharf Fund

0.93

Correlation Coefficient

Royce Small-cap  Scharf Fund

Almost no diversification

The 3 months correlation between Royce and Scharf is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Royce Small Cap Value and Scharf Fund Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scharf Fund Retail and Royce Small-cap 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 Royce Small Cap Value are associated (or correlated) with Scharf Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scharf Fund Retail has no effect on the direction of Royce Small-cap i.e., Royce Small-cap and Scharf Fund go up and down completely randomly.

Pair Corralation between Royce Small-cap and Scharf Fund

Assuming the 90 days horizon Royce Small Cap Value is expected to generate 2.21 times more return on investment than Scharf Fund. However, Royce Small-cap is 2.21 times more volatile than Scharf Fund Retail. It trades about 0.11 of its potential returns per unit of risk. Scharf Fund Retail is currently generating about 0.14 per unit of risk. If you would invest  1,057  in Royce Small Cap Value on September 3, 2024 and sell it today you would earn a total of  92.00  from holding Royce Small Cap Value or generate 8.7% return on investment over 90 days.

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

Royce Small Cap Value  vs.  Scharf Fund Retail

Royce Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Small Cap Value are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Royce Small-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Scharf Fund Retail

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scharf Fund Retail are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Scharf Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royce Small-cap and Scharf Fund

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

The idea behind Royce Small Cap Value and Scharf Fund Retail 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.