Correlation Between Timothy Conservative and Small Cap

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

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

Diversification Opportunities for Timothy Conservative and Small Cap

0.19

Correlation Coefficient

Timothy Conservative  Small Cap

Average diversification

The 3 months correlation between Timothy and SMALL is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Servative Growth and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Timothy Conservative 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 Timothy Servative Growth are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Timothy Conservative i.e., Timothy Conservative and Small Cap go up and down completely randomly.

Pair Corralation between Timothy Conservative and Small Cap

Assuming the 90 days horizon Timothy Servative Growth is expected to generate 0.41 times more return on investment than Small Cap. However, Timothy Servative Growth is 2.45 times less risky than Small Cap. It trades about 0.09 of its potential returns per unit of risk. Small Cap Equity is currently generating about -0.12 per unit of risk. If you would invest  873.00  in Timothy Servative Growth on December 20, 2024 and sell it today you would earn a total of  21.00  from holding Timothy Servative Growth or generate 2.41% return on investment over 90 days.

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

Timothy Servative Growth  vs.  Small Cap Equity

Timothy Servative Growth

Risk-Adjusted Performance

OK

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

Small Cap Equity

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Equity 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.

Pair Trading with Timothy Conservative and Small Cap

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

The idea behind Timothy Servative Growth and Small Cap Equity 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.