Correlation Between Mesirow Financial and Small Cap

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

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

Diversification Opportunities for Mesirow Financial and Small Cap

0.76

Correlation Coefficient

Mesirow Financial  Small Cap

Poor diversification

The 3 months correlation between Mesirow and Small is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Mesirow Financial Small and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Mesirow Financial 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 Mesirow Financial Small 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 Core has no effect on the direction of Mesirow Financial i.e., Mesirow Financial and Small Cap go up and down completely randomly.

Pair Corralation between Mesirow Financial and Small Cap

Assuming the 90 days horizon Mesirow Financial Small is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mesirow Financial Small is 1.06 times less risky than Small Cap. The mutual fund trades about -0.24 of its potential returns per unit of risk. The Small Cap Core is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  1,274  in Small Cap Core on August 23, 2025 and sell it today you would lose (68.00) from holding Small Cap Core or give up 5.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Mesirow Financial Small  vs.  Small Cap Core

Mesirow Financial Small

Risk-Adjusted Performance

Weakest

Over the last 90 days Mesirow Financial Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Mesirow Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Core

Risk-Adjusted Performance

Weakest

Over the last 90 days Small Cap Core has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic 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 Mesirow Financial and Small Cap

The main advantage of trading using opposite Mesirow Financial and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesirow Financial 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 Mesirow Financial Small and Small Cap Core 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.