Correlation Between Small Cap and Janus Overseas

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

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

Diversification Opportunities for Small Cap and Janus Overseas

-0.2

Correlation Coefficient

Small Cap  Janus Overseas

Good diversification

The 3 months correlation between Small and Janus is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Janus Overseas Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Janus Overseas and 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 Small Cap Stock are associated (or correlated) with Janus Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Janus Overseas has no effect on the direction of Small Cap i.e., Small Cap and Janus Overseas go up and down completely randomly.

Pair Corralation between Small Cap and Janus Overseas

Assuming the 90 days horizon Small Cap is expected to generate 1.31 times less return on investment than Janus Overseas. In addition to that, Small Cap is 1.52 times more volatile than Janus Overseas Fund. It trades about 0.02 of its total potential returns per unit of risk. Janus Overseas Fund is currently generating about 0.04 per unit of volatility. If you would invest  4,231  in Janus Overseas Fund on December 4, 2024 and sell it today you would earn a total of  610.00  from holding Janus Overseas Fund or generate 14.42% return on investment over 90 days.

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

Small Cap Stock  vs.  Janus Overseas Fund

Small Cap Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Stock 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.

Janus Overseas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Janus Overseas Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Janus Overseas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Janus Overseas

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

The idea behind Small Cap Stock and Janus Overseas Fund 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.