Correlation Between Zacks Small-cap and Walthausen Small

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

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

Diversification Opportunities for Zacks Small-cap and Walthausen Small

0.82

Correlation Coefficient

Zacks Small-cap  Walthausen Small

Very poor diversification

The 3 months correlation between Zacks and Walthausen is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Zacks Small Cap E and Walthausen Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walthausen Small Cap and Zacks 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 Zacks Small Cap E are associated (or correlated) with Walthausen Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walthausen Small Cap has no effect on the direction of Zacks Small-cap i.e., Zacks Small-cap and Walthausen Small go up and down completely randomly.

Pair Corralation between Zacks Small-cap and Walthausen Small

Assuming the 90 days horizon Zacks Small Cap E is expected to generate 0.99 times more return on investment than Walthausen Small. However, Zacks Small Cap E is 1.01 times less risky than Walthausen Small. It trades about 0.0 of its potential returns per unit of risk. Walthausen Small Cap is currently generating about -0.01 per unit of risk. If you would invest  3,270  in Zacks Small Cap E on October 5, 2024 and sell it today you would lose (220.00) from holding Zacks Small Cap E or give up 6.73% of portfolio value over 90 days.

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

Zacks Small Cap E  vs.  Walthausen Small Cap

Zacks Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zacks Small Cap E 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 indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

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.

Pair Trading with Zacks Small-cap and Walthausen Small

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

The idea behind Zacks Small Cap E and Walthausen Small Cap 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..