Correlation Between Driehaus Emerging and Driehaus Smallmid

Can any of the company-specific risk be diversified away by investing in both Driehaus Emerging 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 Emerging 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 Emerging Markets and Driehaus Smallmid Cap, you can compare the effects of market volatilities on Driehaus Emerging 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 Emerging with a short position of Driehaus Smallmid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Driehaus Emerging and Driehaus Smallmid.

Diversification Opportunities for Driehaus Emerging and Driehaus Smallmid

0.58

Correlation Coefficient

Driehaus Emerging  Driehaus Smallmid

Very weak diversification

The 3 months correlation between Driehaus and Driehaus is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Driehaus Emerging Markets 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 Emerging 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 Emerging Markets 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 Emerging i.e., Driehaus Emerging and Driehaus Smallmid go up and down completely randomly.

Pair Corralation between Driehaus Emerging and Driehaus Smallmid

Assuming the 90 days horizon Driehaus Emerging is expected to generate 1.3 times less return on investment than Driehaus Smallmid. But when comparing it to its historical volatility, Driehaus Emerging Markets is 1.72 times less risky than Driehaus Smallmid. It trades about 0.15 of its potential returns per unit of risk. Driehaus Smallmid Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,645  in Driehaus Smallmid Cap on February 18, 2024 and sell it today you would earn a total of  149.00  from holding Driehaus Smallmid Cap or generate 9.06% return on investment over 90 days.

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

Driehaus Emerging Markets  vs.  Driehaus Smallmid Cap

Driehaus Emerging Markets

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Driehaus Emerging Markets are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Driehaus Emerging may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Driehaus Smallmid Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Driehaus Smallmid Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Driehaus Smallmid may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Driehaus Emerging and Driehaus Smallmid

The main advantage of trading using opposite Driehaus Emerging and Driehaus Smallmid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Driehaus Emerging 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 Emerging Markets 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.