Correlation Between Timothy Small-cap and Timothy Plan

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

Diversification Opportunities for Timothy Small-cap and Timothy Plan

-0.37

Correlation Coefficient

Timothy Small-cap  Timothy Plan

Very good diversification

The 3 months correlation between Timothy and Timothy is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Small Cap Value and Timothy Plan International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Plan Interna 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 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 Interna has no effect on the direction of Timothy Small-cap i.e., Timothy Small-cap and Timothy Plan go up and down completely randomly.

Pair Corralation between Timothy Small-cap and Timothy Plan

Assuming the 90 days horizon Timothy Small Cap Value is expected to under-perform the Timothy Plan. In addition to that, Timothy Small-cap is 1.09 times more volatile than Timothy Plan International. It trades about -0.06 of its total potential returns per unit of risk. Timothy Plan International is currently generating about 0.1 per unit of volatility. If you would invest  1,272  in Timothy Plan International on December 27, 2024 and sell it today you would earn a total of  71.00  from holding Timothy Plan International or generate 5.58% return on investment over 90 days.

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

Timothy Small Cap Value  vs.  Timothy Plan International

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 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 Plan Interna

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Timothy Plan International are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Timothy Plan 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 Plan

The main advantage of trading using opposite Timothy Small-cap and Timothy Plan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timothy Small-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 Small Cap Value and Timothy Plan International 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.