Correlation Between Royce Smaller-companie and Marsico International

Can any of the company-specific risk be diversified away by investing in both Royce Smaller-companie and Marsico International 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 Smaller-companie and Marsico International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Royce Smaller Companies Growth and Marsico International Opportunities, you can compare the effects of market volatilities on Royce Smaller-companie and Marsico International 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 Smaller-companie with a short position of Marsico International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Royce Smaller-companie and Marsico International.

Diversification Opportunities for Royce Smaller-companie and Marsico International

0.72

Correlation Coefficient

Royce Smaller-companie  Marsico International

Poor diversification

The 3 months correlation between Royce and Marsico is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Royce Smaller Companies Growth and Marsico International Opportun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marsico International and Royce Smaller-companie 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 Smaller Companies Growth are associated (or correlated) with Marsico International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marsico International has no effect on the direction of Royce Smaller-companie i.e., Royce Smaller-companie and Marsico International go up and down completely randomly.

Pair Corralation between Royce Smaller-companie and Marsico International

Assuming the 90 days horizon Royce Smaller Companies Growth is expected to generate 1.22 times more return on investment than Marsico International. However, Royce Smaller-companie is 1.22 times more volatile than Marsico International Opportunities. It trades about 0.26 of its potential returns per unit of risk. Marsico International Opportunities is currently generating about 0.12 per unit of risk. If you would invest  697.00  in Royce Smaller Companies Growth on September 2, 2024 and sell it today you would earn a total of  156.00  from holding Royce Smaller Companies Growth or generate 22.38% return on investment over 90 days.

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

Royce Smaller Companies Growth  vs.  Marsico International Opportun

Royce Smaller Companies

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Royce Smaller Companies Growth are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Royce Smaller-companie showed solid returns over the last few months and may actually be approaching a breakup point.

Marsico International

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Royce Smaller-companie and Marsico International

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

The idea behind Royce Smaller Companies Growth and Marsico International Opportunities 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.