Correlation Between Timothy Small-cap and Timothy Conservative

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

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

Diversification Opportunities for Timothy Small-cap and Timothy Conservative

0.94

Correlation Coefficient

Timothy Small-cap  Timothy Conservative

Almost no diversification

The 3 months correlation between Timothy and Timothy is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Small Cap Value and Timothy Servative Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Servative Growth and Timothy 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 Timothy Small Cap Value are associated (or correlated) with Timothy Conservative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Servative Growth has no effect on the direction of Timothy Small-cap i.e., Timothy Small-cap and Timothy Conservative go up and down completely randomly.

Pair Corralation between Timothy Small-cap and Timothy Conservative

Assuming the 90 days horizon Timothy Small Cap Value is expected to generate 2.6 times more return on investment than Timothy Conservative. However, Timothy Small-cap is 2.6 times more volatile than Timothy Servative Growth. It trades about 0.2 of its potential returns per unit of risk. Timothy Servative Growth is currently generating about 0.26 per unit of risk. If you would invest  1,879  in Timothy Small Cap Value on October 20, 2024 and sell it today you would earn a total of  74.00  from holding Timothy Small Cap Value or generate 3.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.0%
Values	Daily Returns

Timothy Small Cap Value  vs.  Timothy Servative Growth

Timothy Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Timothy Servative Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Timothy Small-cap and Timothy Conservative

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

The idea behind Timothy Small Cap Value and Timothy Servative Growth 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.