Correlation Between Russell 2000 and Ancora Microcap

Can any of the company-specific risk be diversified away by investing in both Russell 2000 and Ancora Microcap 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 Russell 2000 and Ancora Microcap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Russell 2000 2x and Ancora Microcap Fund, you can compare the effects of market volatilities on Russell 2000 and Ancora Microcap 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 Russell 2000 with a short position of Ancora Microcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Ancora Microcap.

Diversification Opportunities for Russell 2000 and Ancora Microcap

0.97

Correlation Coefficient

Russell 2000  Ancora Microcap

Almost no diversification

The 3 months correlation between Russell and Ancora is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 2x and Ancora Microcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ancora Microcap and Russell 2000 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 Russell 2000 2x are associated (or correlated) with Ancora Microcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ancora Microcap has no effect on the direction of Russell 2000 i.e., Russell 2000 and Ancora Microcap go up and down completely randomly.

Pair Corralation between Russell 2000 and Ancora Microcap

Assuming the 90 days horizon Russell 2000 2x is expected to generate 2.55 times more return on investment than Ancora Microcap. However, Russell 2000 is 2.55 times more volatile than Ancora Microcap Fund. It trades about 0.16 of its potential returns per unit of risk. Ancora Microcap Fund is currently generating about 0.14 per unit of risk. If you would invest  16,038  in Russell 2000 2x on September 3, 2024 and sell it today you would earn a total of  4,134  from holding Russell 2000 2x or generate 25.78% return on investment over 90 days.

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

Russell 2000 2x  vs.  Ancora Microcap Fund

Russell 2000 2x

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Russell 2000 2x are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Russell 2000 showed solid returns over the last few months and may actually be approaching a breakup point.

Ancora Microcap

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ancora Microcap Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ancora Microcap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Russell 2000 and Ancora Microcap

The main advantage of trading using opposite Russell 2000 and Ancora Microcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 position performs unexpectedly, Ancora Microcap 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 Ancora Microcap will offset losses from the drop in Ancora Microcap's long position.

The idea behind Russell 2000 2x and Ancora Microcap 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.