Correlation Between Scout Small and Advisors Capital

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

By analyzing existing cross correlation between Scout Small Cap and Advisors Capital Tactical, you can compare the effects of market volatilities on Scout Small and Advisors Capital 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 Scout Small with a short position of Advisors Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scout Small and Advisors Capital.

Diversification Opportunities for Scout Small and Advisors Capital

-0.38

Correlation Coefficient

Scout Small  Advisors Capital

Very good diversification

The 3 months correlation between Scout and Advisors is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Scout Small Cap and Advisors Capital Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Capital Tactical and Scout 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 Scout Small Cap are associated (or correlated) with Advisors Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Capital Tactical has no effect on the direction of Scout Small i.e., Scout Small and Advisors Capital go up and down completely randomly.

Pair Corralation between Scout Small and Advisors Capital

Assuming the 90 days horizon Scout Small Cap is expected to under-perform the Advisors Capital. In addition to that, Scout Small is 8.64 times more volatile than Advisors Capital Tactical. It trades about -0.13 of its total potential returns per unit of risk. Advisors Capital Tactical is currently generating about 0.11 per unit of volatility. If you would invest  926.00  in Advisors Capital Tactical on December 27, 2024 and sell it today you would earn a total of  15.00  from holding Advisors Capital Tactical or generate 1.62% return on investment over 90 days.

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

Scout Small Cap  vs.  Advisors Capital Tactical

Scout Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scout Small Cap 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 technical 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.

Advisors Capital Tactical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Advisors Capital Tactical are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Advisors Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Scout Small and Advisors Capital

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

The idea behind Scout Small Cap and Advisors Capital Tactical 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.