Correlation Between Wcm Focused and Small Company

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

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

Diversification Opportunities for Wcm Focused and Small Company

0.48

Correlation Coefficient

Wcm Focused  Small Company

Very weak diversification

The 3 months correlation between WCM and SMALL is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Wcm Focused International and Small Pany Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Fund and Wcm Focused 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 Wcm Focused International are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Fund has no effect on the direction of Wcm Focused i.e., Wcm Focused and Small Company go up and down completely randomly.

Pair Corralation between Wcm Focused and Small Company

Assuming the 90 days horizon Wcm Focused International is expected to generate 1.34 times more return on investment than Small Company. However, Wcm Focused is 1.34 times more volatile than Small Pany Fund. It trades about -0.07 of its potential returns per unit of risk. Small Pany Fund is currently generating about -0.23 per unit of risk. If you would invest  2,588  in Wcm Focused International on November 30, 2024 and sell it today you would lose (199.00) from holding Wcm Focused International or give up 7.69% of portfolio value over 90 days.

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

Wcm Focused International  vs.  Small Pany Fund

Wcm Focused International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wcm Focused International has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Small Pany Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Pany Fund 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 fundamental drivers remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Wcm Focused and Small Company

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

The idea behind Wcm Focused International and Small Pany 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.