Correlation Between Timothy Small and Timothy Strategic

Can any of the company-specific risk be diversified away by investing in both Timothy Small and Timothy Strategic 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 Strategic 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 Strategic Growth, you can compare the effects of market volatilities on Timothy Small and Timothy Strategic 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 Strategic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timothy Small and Timothy Strategic.

Diversification Opportunities for Timothy Small and Timothy Strategic

0.71

Correlation Coefficient

Timothy Small  Timothy Strategic

Poor diversification

The 3 months correlation between Timothy and Timothy is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Timothy Small Cap Value and Timothy Strategic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timothy Strategic Growth 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 Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timothy Strategic Growth has no effect on the direction of Timothy Small i.e., Timothy Small and Timothy Strategic go up and down completely randomly.

Pair Corralation between Timothy Small and Timothy Strategic

Assuming the 90 days horizon Timothy Small Cap Value is expected to generate 2.22 times more return on investment than Timothy Strategic. However, Timothy Small is 2.22 times more volatile than Timothy Strategic Growth. It trades about -0.01 of its potential returns per unit of risk. Timothy Strategic Growth is currently generating about -0.06 per unit of risk. If you would invest  2,080  in Timothy Small Cap Value on September 15, 2024 and sell it today you would lose (38.00) from holding Timothy Small Cap Value or give up 1.83% of portfolio value over 90 days.

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

Timothy Small Cap Value  vs.  Timothy Strategic 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 forward indicators, Timothy Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Timothy Strategic Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Timothy Small and Timothy Strategic

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

The idea behind Timothy Small Cap Value and Timothy Strategic 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.