Correlation Between Fabwx and Small Pany

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

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

Diversification Opportunities for Fabwx and Small Pany

0.93

Correlation Coefficient

Fabwx  Small Pany

Almost no diversification

The 3 months correlation between Fabwx and Small is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Fabwx and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Fabwx 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 Fabwx are associated (or correlated) with Small Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Fabwx i.e., Fabwx and Small Pany go up and down completely randomly.

Pair Corralation between Fabwx and Small Pany

Assuming the 90 days horizon Fabwx is expected to generate 0.5 times more return on investment than Small Pany. However, Fabwx is 1.98 times less risky than Small Pany. It trades about 0.31 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.11 per unit of risk. If you would invest  1,445  in Fabwx on May 5, 2025 and sell it today you would earn a total of  210.00  from holding Fabwx or generate 14.53% return on investment over 90 days.

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

Fabwx  vs.  Small Pany Growth

Fabwx

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Fabwx are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Fabwx showed solid returns over the last few months and may actually be approaching a breakup point.

Small Pany Growth

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Pany may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Fabwx and Small Pany

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

The idea behind Fabwx and Small Pany 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.