Correlation Between Artisan International and Small Cap

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

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

Diversification Opportunities for Artisan International and Small Cap

0.46

Correlation Coefficient

Artisan International  Small Cap

Very weak diversification

The 3 months correlation between Artisan and Small is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Artisan International Value and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Artisan International 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 Artisan International Value 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 Growth has no effect on the direction of Artisan International i.e., Artisan International and Small Cap go up and down completely randomly.

Pair Corralation between Artisan International and Small Cap

Assuming the 90 days horizon Artisan International Value is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Artisan International Value is 1.69 times less risky than Small Cap. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Small Cap Growth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,922  in Small Cap Growth on March 14, 2024 and sell it today you would earn a total of  21.00  from holding Small Cap Growth or generate 1.09% return on investment over 90 days.

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

Artisan International Value  vs.  Small Cap Growth

Artisan International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Artisan International Value are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Artisan International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Growth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Artisan International and Small Cap

The main advantage of trading using opposite Artisan International and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Artisan International 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.

The idea behind Artisan International Value and Small Cap Growth 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.