Correlation Between Timothy Large/mid-cap and Timothy Plan

Can any of the company-specific risk be diversified away by investing in both Timothy Large/mid-cap and Timothy Plan 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 Large/mid-cap and Timothy Plan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Timothy Largemid Cap Value and Timothy Plan Small, you can compare the effects of market volatilities on Timothy Large/mid-cap and Timothy Plan 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 Large/mid-cap with a short position of Timothy Plan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timothy Large/mid-cap and Timothy Plan.

Diversification Opportunities for Timothy Large/mid-cap and Timothy Plan

0.14

Correlation Coefficient

Timothy Large/mid-cap  Timothy Plan

Average diversification

The 3 months correlation between Timothy and Timothy is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Largemid Cap Value and Timothy Plan Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan Small and Timothy Large/mid-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 Timothy Largemid Cap Value are associated (or correlated) with Timothy Plan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Plan Small has no effect on the direction of Timothy Large/mid-cap i.e., Timothy Large/mid-cap and Timothy Plan go up and down completely randomly.

Pair Corralation between Timothy Large/mid-cap and Timothy Plan

Assuming the 90 days horizon Timothy Largemid Cap Value is expected to generate 0.89 times more return on investment than Timothy Plan. However, Timothy Largemid Cap Value is 1.13 times less risky than Timothy Plan. It trades about -0.16 of its potential returns per unit of risk. Timothy Plan Small is currently generating about -0.25 per unit of risk. If you would invest  2,576  in Timothy Largemid Cap Value on December 5, 2024 and sell it today you would lose (309.00) from holding Timothy Largemid Cap Value or give up 12.0% of portfolio value over 90 days.

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

Timothy Largemid Cap Value  vs.  Timothy Plan Small

Timothy Large/mid-cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timothy Largemid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Timothy Plan Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Timothy Plan Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Timothy Large/mid-cap and Timothy Plan

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

The idea behind Timothy Largemid Cap Value and Timothy Plan Small 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.