Correlation Between Alexis Practical and Avantis Small

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

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

Diversification Opportunities for Alexis Practical and Avantis Small

0.88

Correlation Coefficient

Alexis Practical  Avantis Small

Very poor diversification

The 3 months correlation between Alexis and Avantis is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Alexis Practical Tactical and Avantis Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantis Small Cap and Alexis Practical 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 Alexis Practical Tactical are associated (or correlated) with Avantis Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantis Small Cap has no effect on the direction of Alexis Practical i.e., Alexis Practical and Avantis Small go up and down completely randomly.

Pair Corralation between Alexis Practical and Avantis Small

Given the investment horizon of 90 days Alexis Practical is expected to generate 1.33 times less return on investment than Avantis Small. But when comparing it to its historical volatility, Alexis Practical Tactical is 2.26 times less risky than Avantis Small. It trades about 0.03 of its potential returns per unit of risk. Avantis Small Cap is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  9,506  in Avantis Small Cap on September 24, 2024 and sell it today you would earn a total of  105.00  from holding Avantis Small Cap or generate 1.1% return on investment over 90 days.

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

Alexis Practical Tactical  vs.  Avantis Small Cap

Alexis Practical Tactical

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alexis Practical Tactical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Alexis Practical is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Avantis Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Small Cap are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Avantis Small is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Alexis Practical and Avantis Small

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

The idea behind Alexis Practical Tactical and Avantis 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.

Check out your portfolio center.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.