Correlation Between Driehaus Micro and Driehaus Smallmid

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

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

Diversification Opportunities for Driehaus Micro and Driehaus Smallmid

0.95

Correlation Coefficient

Driehaus Micro  Driehaus Smallmid

Almost no diversification

The 3 months correlation between Driehaus and Driehaus is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Driehaus Micro Cap and Driehaus Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driehaus Smallmid Cap and Driehaus Micro 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 Driehaus Micro Cap are associated (or correlated) with Driehaus Smallmid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driehaus Smallmid Cap has no effect on the direction of Driehaus Micro i.e., Driehaus Micro and Driehaus Smallmid go up and down completely randomly.

Pair Corralation between Driehaus Micro and Driehaus Smallmid

Assuming the 90 days horizon Driehaus Micro Cap is expected to generate 1.1 times more return on investment than Driehaus Smallmid. However, Driehaus Micro is 1.1 times more volatile than Driehaus Smallmid Cap. It trades about -0.07 of its potential returns per unit of risk. Driehaus Smallmid Cap is currently generating about -0.15 per unit of risk. If you would invest  1,232  in Driehaus Micro Cap on February 2, 2024 and sell it today you would lose (31.00) from holding Driehaus Micro Cap or give up 2.52% of portfolio value over 90 days.

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

Driehaus Micro Cap  vs.  Driehaus Smallmid Cap

Driehaus Micro Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Driehaus Micro Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Driehaus Micro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Driehaus Smallmid Cap

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Driehaus Smallmid Cap are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Driehaus Smallmid is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Driehaus Micro and Driehaus Smallmid

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

The idea behind Driehaus Micro Cap and Driehaus Smallmid Cap 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.