Correlation Between Smallcap Growth and Aquila Three

Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Aquila Three 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 Smallcap Growth and Aquila Three into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smallcap Growth Fund and Aquila Three Peaks, you can compare the effects of market volatilities on Smallcap Growth and Aquila Three 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 Smallcap Growth with a short position of Aquila Three. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Aquila Three.

Diversification Opportunities for Smallcap Growth and Aquila Three

-0.3

Correlation Coefficient

Smallcap Growth  Aquila Three

Very good diversification

The 3 months correlation between Smallcap and Aquila is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Aquila Three Peaks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquila Three Peaks and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Aquila Three. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquila Three Peaks has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Aquila Three go up and down completely randomly.

Pair Corralation between Smallcap Growth and Aquila Three

Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 7.96 times more return on investment than Aquila Three. However, Smallcap Growth is 7.96 times more volatile than Aquila Three Peaks. It trades about 0.12 of its potential returns per unit of risk. Aquila Three Peaks is currently generating about -0.03 per unit of risk. If you would invest  1,549  in Smallcap Growth Fund on September 13, 2024 and sell it today you would earn a total of  137.00  from holding Smallcap Growth Fund or generate 8.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.81%
Values	Daily Returns

Smallcap Growth Fund  vs.  Aquila Three Peaks

Smallcap Growth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Growth Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Smallcap Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aquila Three Peaks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aquila Three Peaks has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Aquila Three is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Smallcap Growth and Aquila Three

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

The idea behind Smallcap Growth Fund and Aquila Three Peaks 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.