Correlation Between Undiscovered Managers and Hotchkis Wiley

Can any of the company-specific risk be diversified away by investing in both Undiscovered Managers and Hotchkis Wiley 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 Undiscovered Managers and Hotchkis Wiley into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Undiscovered Managers Behavioral and Hotchkis Wiley Small, you can compare the effects of market volatilities on Undiscovered Managers and Hotchkis Wiley 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 Undiscovered Managers with a short position of Hotchkis Wiley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Undiscovered Managers and Hotchkis Wiley.

Diversification Opportunities for Undiscovered Managers and Hotchkis Wiley

0.96

Correlation Coefficient

Undiscovered Managers  Hotchkis Wiley

Almost no diversification

The 3 months correlation between Undiscovered and Hotchkis is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Undiscovered Managers Behavior and Hotchkis Wiley Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotchkis Wiley Small and Undiscovered Managers 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 Undiscovered Managers Behavioral are associated (or correlated) with Hotchkis Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotchkis Wiley Small has no effect on the direction of Undiscovered Managers i.e., Undiscovered Managers and Hotchkis Wiley go up and down completely randomly.

Pair Corralation between Undiscovered Managers and Hotchkis Wiley

Assuming the 90 days horizon Undiscovered Managers is expected to generate 1.63 times less return on investment than Hotchkis Wiley. In addition to that, Undiscovered Managers is 1.04 times more volatile than Hotchkis Wiley Small. It trades about 0.03 of its total potential returns per unit of risk. Hotchkis Wiley Small is currently generating about 0.05 per unit of volatility. If you would invest  6,522  in Hotchkis Wiley Small on September 2, 2024 and sell it today you would earn a total of  2,081  from holding Hotchkis Wiley Small or generate 31.91% return on investment over 90 days.

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

Undiscovered Managers Behavior  vs.  Hotchkis Wiley Small

Undiscovered Managers

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Undiscovered Managers Behavioral are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Undiscovered Managers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hotchkis Wiley Small

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hotchkis Wiley Small are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hotchkis Wiley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Undiscovered Managers and Hotchkis Wiley

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

The idea behind Undiscovered Managers Behavioral and Hotchkis Wiley 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.