Correlation Between Adams Diversified and Small Cap
Can any of the company-specific risk be diversified away by investing in both Adams Diversified and Small Cap 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 Adams Diversified and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adams Diversified Equity and Small Cap Value, you can compare the effects of market volatilities on Adams Diversified and Small Cap 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 Adams Diversified with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Diversified and Small Cap.
Diversification Opportunities for Adams Diversified and Small Cap
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Adams and Small is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Adams Diversified Equity and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Adams Diversified 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 Adams Diversified Equity are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Adams Diversified i.e., Adams Diversified and Small Cap go up and down completely randomly.
Pair Corralation between Adams Diversified and Small Cap
Considering the 90-day investment horizon Adams Diversified Equity is expected to generate 0.68 times more return on investment than Small Cap. However, Adams Diversified Equity is 1.47 times less risky than Small Cap. It trades about 0.12 of its potential returns per unit of risk. Small Cap Value is currently generating about 0.05 per unit of risk. If you would invest 1,221 in Adams Diversified Equity on September 5, 2024 and sell it today you would earn a total of 845.00 from holding Adams Diversified Equity or generate 69.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Adams Diversified Equity vs. Small Cap Value
Performance |
| Timeline |
| Adams Diversified Equity |
| Small Cap Value |
Adams Diversified and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Diversified and Small Cap
The main advantage of trading using opposite Adams Diversified and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Diversified position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Adams Diversified vs. Tri Continental Closed | Adams Diversified vs. SRH Total Return | Adams Diversified vs. Putnam Municipal Opportunities | Adams Diversified vs. Tortoise Energy Independence |
| Small Cap vs. Adams Diversified Equity | Small Cap vs. Wasatch Small Cap | Small Cap vs. Pgim Jennison Diversified | Small Cap vs. Lord Abbett Diversified |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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