Correlation Between Royce Quant and AdvisorShares

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

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

Diversification Opportunities for Royce Quant and AdvisorShares

0.65

Correlation Coefficient

Royce Quant  AdvisorShares

Poor diversification

The 3 months correlation between Royce and AdvisorShares is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Royce Quant Small Cap and AdvisorShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares and Royce Quant 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 Royce Quant Small Cap are associated (or correlated) with AdvisorShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares has no effect on the direction of Royce Quant i.e., Royce Quant and AdvisorShares go up and down completely randomly.

Pair Corralation between Royce Quant and AdvisorShares

If you would invest  3,999  in Royce Quant Small Cap on September 12, 2024 and sell it today you would earn a total of  523.00  from holding Royce Quant Small Cap or generate 13.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Royce Quant Small Cap  vs.  AdvisorShares

Royce Quant Small

Risk-Adjusted Performance

12 of 100

Good

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

AdvisorShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvisorShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, AdvisorShares is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Royce Quant and AdvisorShares

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

The idea behind Royce Quant Small Cap and AdvisorShares 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.