Correlation Between Timothy Small and Timothy Large/mid-cap

Can any of the company-specific risk be diversified away by investing in both Timothy Small and Timothy Large/mid-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 Small and Timothy Large/mid-cap 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 Largemid Cap Value, you can compare the effects of market volatilities on Timothy Small and Timothy Large/mid-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 Small with a short position of Timothy Large/mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timothy Small and Timothy Large/mid-cap.

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

0.93

Correlation Coefficient

Timothy Small  Timothy Large/mid-cap

Almost no diversification

The 3 months correlation between Timothy and Timothy is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Small Cap Value and Timothy Largemid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Large/mid-cap and Timothy Small 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 Large/mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Large/mid-cap has no effect on the direction of Timothy Small i.e., Timothy Small and Timothy Large/mid-cap go up and down completely randomly.

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

Assuming the 90 days horizon Timothy Small Cap Value is expected to under-perform the Timothy Large/mid-cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Timothy Small Cap Value is 1.12 times less risky than Timothy Large/mid-cap. The mutual fund trades about -0.22 of its potential returns per unit of risk. The Timothy Largemid Cap Value is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  2,603  in Timothy Largemid Cap Value on December 4, 2024 and sell it today you would lose (315.00) from holding Timothy Largemid Cap Value or give up 12.1% of portfolio value over 90 days.

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

Timothy Small Cap Value  vs.  Timothy Largemid Cap Value

Timothy Small Cap

Risk-Adjusted Performance

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 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 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.

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

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

The idea behind Timothy Small Cap Value and Timothy Largemid Cap Value 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.