Correlation Between Small Cap and Fisher Investments

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

By analyzing existing cross correlation between Small Cap Value and Fisher Small Cap, you can compare the effects of market volatilities on Small Cap and Fisher Investments 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 Fisher Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Fisher Investments.

Diversification Opportunities for Small Cap and Fisher Investments

0.99

Correlation Coefficient

Small Cap  Fisher Investments

No risk reduction

The 3 months correlation between SMALL and Fisher is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Fisher Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fisher Investments 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 Value are associated (or correlated) with Fisher Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fisher Investments has no effect on the direction of Small Cap i.e., Small Cap and Fisher Investments go up and down completely randomly.

Pair Corralation between Small Cap and Fisher Investments

Assuming the 90 days horizon Small Cap is expected to generate 1.21 times less return on investment than Fisher Investments. In addition to that, Small Cap is 1.01 times more volatile than Fisher Small Cap. It trades about 0.13 of its total potential returns per unit of risk. Fisher Small Cap is currently generating about 0.16 per unit of volatility. If you would invest  1,192  in Fisher Small Cap on September 3, 2024 and sell it today you would earn a total of  161.00  from holding Fisher Small Cap or generate 13.51% return on investment over 90 days.

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

Small Cap Value  vs.  Fisher Small Cap

Small Cap Value

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fisher Investments

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fisher Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Fisher Investments showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small Cap and Fisher Investments

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

The idea behind Small Cap Value and Fisher 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.