Correlation Between Walthausen Small and Snow Capital

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

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

Diversification Opportunities for Walthausen Small and Snow Capital

0.92

Correlation Coefficient

Walthausen Small  Snow Capital

Almost no diversification

The 3 months correlation between Walthausen and Snow is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Walthausen Small Cap and Snow Capital Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snow Capital Opportunity and Walthausen 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 Walthausen Small Cap are associated (or correlated) with Snow Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snow Capital Opportunity has no effect on the direction of Walthausen Small i.e., Walthausen Small and Snow Capital go up and down completely randomly.

Pair Corralation between Walthausen Small and Snow Capital

Assuming the 90 days horizon Walthausen Small Cap is expected to under-perform the Snow Capital. In addition to that, Walthausen Small is 2.48 times more volatile than Snow Capital Opportunity. It trades about -0.29 of its total potential returns per unit of risk. Snow Capital Opportunity is currently generating about -0.49 per unit of volatility. If you would invest  3,620  in Snow Capital Opportunity on September 23, 2024 and sell it today you would lose (413.00) from holding Snow Capital Opportunity or give up 11.41% of portfolio value over 90 days.

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

Walthausen Small Cap  vs.  Snow Capital Opportunity

Walthausen Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Snow Capital Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Snow Capital Opportunity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Snow 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 Walthausen Small and Snow Capital

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

The idea behind Walthausen Small Cap and Snow Capital Opportunity 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.