Correlation Between Sp 500 and Intrepid Capital

Can any of the company-specific risk be diversified away by investing in both Sp 500 and Intrepid 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 Sp 500 and Intrepid Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sp 500 Index and Intrepid Capital Fund, you can compare the effects of market volatilities on Sp 500 and Intrepid 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 Sp 500 with a short position of Intrepid Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp 500 and Intrepid Capital.

Diversification Opportunities for Sp 500 and Intrepid Capital

0.51

Correlation Coefficient

Sp 500  Intrepid Capital

Very weak diversification

The 3 months correlation between USPRX and Intrepid is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sp 500 Index and Intrepid Capital Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intrepid Capital and Sp 500 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 Sp 500 Index are associated (or correlated) with Intrepid Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intrepid Capital has no effect on the direction of Sp 500 i.e., Sp 500 and Intrepid Capital go up and down completely randomly.

Pair Corralation between Sp 500 and Intrepid Capital

Assuming the 90 days horizon Sp 500 Index is expected to generate 1.61 times more return on investment than Intrepid Capital. However, Sp 500 is 1.61 times more volatile than Intrepid Capital Fund. It trades about -0.06 of its potential returns per unit of risk. Intrepid Capital Fund is currently generating about -0.09 per unit of risk. If you would invest  7,577  in Sp 500 Index on December 5, 2024 and sell it today you would lose (271.00) from holding Sp 500 Index or give up 3.58% of portfolio value over 90 days.

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

Sp 500 Index  vs.  Intrepid Capital Fund

Sp 500 Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sp 500 Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Sp 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Intrepid Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Intrepid Capital Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Intrepid 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 Sp 500 and Intrepid Capital

The main advantage of trading using opposite Sp 500 and Intrepid Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp 500 position performs unexpectedly, Intrepid 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 Intrepid Capital will offset losses from the drop in Intrepid Capital's long position.

The idea behind Sp 500 Index and Intrepid Capital 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.