Correlation Between Advantage Portfolio and Small-cap Value

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

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

Diversification Opportunities for Advantage Portfolio and Small-cap Value

0.86

Correlation Coefficient

Advantage Portfolio  Small-cap Value

Very poor diversification

The 3 months correlation between Advantage and Small-cap is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Advantage Portfolio Class and Small Cap Value Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Advantage Portfolio 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 Advantage Portfolio Class are associated (or correlated) with Small-cap Value. 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 Advantage Portfolio i.e., Advantage Portfolio and Small-cap Value go up and down completely randomly.

Pair Corralation between Advantage Portfolio and Small-cap Value

Assuming the 90 days horizon Advantage Portfolio Class is expected to generate 1.0 times more return on investment than Small-cap Value. However, Advantage Portfolio Class is 1.0 times less risky than Small-cap Value. It trades about 0.14 of its potential returns per unit of risk. Small Cap Value Series is currently generating about 0.09 per unit of risk. If you would invest  2,276  in Advantage Portfolio Class on May 16, 2025 and sell it today you would earn a total of  216.00  from holding Advantage Portfolio Class or generate 9.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Advantage Portfolio Class  vs.  Small Cap Value Series

Advantage Portfolio Class

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Portfolio Class are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Advantage Portfolio may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Small Cap Value

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value Series are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Small-cap Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Advantage Portfolio and Small-cap Value

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

The idea behind Advantage Portfolio Class and Small Cap Value Series 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.