Correlation Between Avantis Large and Small Cap
Can any of the company-specific risk be diversified away by investing in both Avantis Large 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 Avantis Large and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avantis Large Cap and Small Cap Value Fund, you can compare the effects of market volatilities on Avantis Large 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 Avantis Large with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avantis Large and Small Cap.
Diversification Opportunities for Avantis Large and Small Cap
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Avantis and Small is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Large Cap and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Avantis Large 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 Avantis Large Cap 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 Avantis Large i.e., Avantis Large and Small Cap go up and down completely randomly.
Pair Corralation between Avantis Large and Small Cap
Assuming the 90 days horizon Avantis Large Cap is expected to generate 0.45 times more return on investment than Small Cap. However, Avantis Large Cap is 2.2 times less risky than Small Cap. It trades about -0.13 of its potential returns per unit of risk. Small Cap Value Fund is currently generating about -0.23 per unit of risk. If you would invest 1,484 in Avantis Large Cap on September 20, 2024 and sell it today you would lose (30.00) from holding Avantis Large Cap or give up 2.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Avantis Large Cap vs. Small Cap Value Fund
Performance |
| Timeline |
| Avantis Large Cap |
| Small Cap Value |
Avantis Large and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Avantis Large and Small Cap
The main advantage of trading using opposite Avantis Large and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avantis Large 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.| Avantis Large vs. Leggmason Partners Institutional | Avantis Large vs. Iaadx | Avantis Large vs. Rbb Fund | Avantis Large vs. Rbc Microcap Value |
| Small Cap vs. Dana Large Cap | Small Cap vs. Virtus Nfj Large Cap | Small Cap vs. Avantis Large Cap | Small Cap vs. American Mutual Fund |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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