Correlation Between Snow Capital and Walthausen Small

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

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

Diversification Opportunities for Snow Capital and Walthausen Small

0.36

Correlation Coefficient

Snow Capital  Walthausen Small

Weak diversification

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

Pair Corralation between Snow Capital and Walthausen Small

Assuming the 90 days horizon Snow Capital Opportunity is expected to generate 0.66 times more return on investment than Walthausen Small. However, Snow Capital Opportunity is 1.51 times less risky than Walthausen Small. It trades about 0.11 of its potential returns per unit of risk. Walthausen Small Cap is currently generating about -0.06 per unit of risk. If you would invest  3,238  in Snow Capital Opportunity on December 28, 2024 and sell it today you would earn a total of  143.00  from holding Snow Capital Opportunity or generate 4.42% return on investment over 90 days.

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

Snow Capital Opportunity  vs.  Walthausen Small Cap

Snow Capital Opportunity

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Snow Capital Opportunity are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Snow Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Walthausen Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walthausen Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Walthausen Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Snow Capital and Walthausen Small

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

The idea behind Snow Capital Opportunity and Walthausen Small Cap 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.