Correlation Between Small Cap and Tfa Alphagen

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

Diversification Opportunities for Small Cap and Tfa Alphagen

0.31

Correlation Coefficient

Small Cap  Tfa Alphagen

Weak diversification

The 3 months correlation between Small and Tfa is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Tfa Alphagen Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tfa Alphagen Growth 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 Tfa Alphagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tfa Alphagen Growth has no effect on the direction of Small Cap i.e., Small Cap and Tfa Alphagen go up and down completely randomly.

Pair Corralation between Small Cap and Tfa Alphagen

Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Tfa Alphagen. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Stock is 1.02 times less risky than Tfa Alphagen. The mutual fund trades about -0.45 of its potential returns per unit of risk. The Tfa Alphagen Growth is currently generating about -0.29 of returns per unit of risk over similar time horizon. If you would invest  1,152  in Tfa Alphagen Growth on December 6, 2024 and sell it today you would lose (71.00) from holding Tfa Alphagen Growth or give up 6.16% of portfolio value over 90 days.

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

Small Cap Stock  vs.  Tfa Alphagen Growth

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.

Tfa Alphagen Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tfa Alphagen Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Tfa Alphagen 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 Tfa Alphagen

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

The idea behind Small Cap Stock and Tfa Alphagen 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.