Correlation Between Aegis Value and Century Small

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

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

Diversification Opportunities for Aegis Value and Century Small

0.45

Correlation Coefficient

Aegis Value  Century Small

Very weak diversification

The 3 months correlation between Aegis and Century is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Aegis Value Fund and Century Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Small Cap and Aegis Value 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 Aegis Value Fund are associated (or correlated) with Century Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Small Cap has no effect on the direction of Aegis Value i.e., Aegis Value and Century Small go up and down completely randomly.

Pair Corralation between Aegis Value and Century Small

Assuming the 90 days horizon Aegis Value is expected to generate 1.74 times less return on investment than Century Small. But when comparing it to its historical volatility, Aegis Value Fund is 1.19 times less risky than Century Small. It trades about 0.11 of its potential returns per unit of risk. Century Small Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,823  in Century Small Cap on September 12, 2024 and sell it today you would earn a total of  451.00  from holding Century Small Cap or generate 11.8% return on investment over 90 days.

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

Aegis Value Fund  vs.  Century Small Cap

Aegis Value Fund

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aegis Value Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Aegis Value may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Century Small Cap

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Century Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aegis Value and Century Small

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

The idea behind Aegis Value Fund and Century 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.