Correlation Between Small Cap and Delaware Limited

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

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

Diversification Opportunities for Small Cap and Delaware Limited

-0.18

Correlation Coefficient

Small Cap  Delaware Limited

Good diversification

The 3 months correlation between Small and Delaware is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Delaware Limited Term Diversif in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delaware Limited Term and 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 Small Cap Core are associated (or correlated) with Delaware Limited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delaware Limited Term has no effect on the direction of Small Cap i.e., Small Cap and Delaware Limited go up and down completely randomly.

Pair Corralation between Small Cap and Delaware Limited

Assuming the 90 days horizon Small Cap Core is expected to generate 8.55 times more return on investment than Delaware Limited. However, Small Cap is 8.55 times more volatile than Delaware Limited Term Diversified. It trades about 0.15 of its potential returns per unit of risk. Delaware Limited Term Diversified is currently generating about 0.15 per unit of risk. If you would invest  1,210  in Small Cap Core on October 25, 2024 and sell it today you would earn a total of  37.00  from holding Small Cap Core or generate 3.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Small Cap Core  vs.  Delaware Limited Term Diversif

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Delaware Limited Term

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delaware Limited Term Diversified are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Delaware Limited is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Delaware Limited

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

The idea behind Small Cap Core and Delaware Limited Term Diversified 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.