Correlation Between Largecap Value and Perkins Small

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

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

Diversification Opportunities for Largecap Value and Perkins Small

0.96

Correlation Coefficient

Largecap Value  Perkins Small

Almost no diversification

The 3 months correlation between Largecap and Perkins is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Largecap Value Fund and Perkins Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perkins Small Cap and Largecap Value 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 Largecap Value Fund are associated (or correlated) with Perkins Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perkins Small Cap has no effect on the direction of Largecap Value i.e., Largecap Value and Perkins Small go up and down completely randomly.

Pair Corralation between Largecap Value and Perkins Small

Assuming the 90 days horizon Largecap Value is expected to generate 1.44 times less return on investment than Perkins Small. But when comparing it to its historical volatility, Largecap Value Fund is 1.71 times less risky than Perkins Small. It trades about 0.19 of its potential returns per unit of risk. Perkins Small Cap is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,049  in Perkins Small Cap on May 22, 2025 and sell it today you would earn a total of  224.00  from holding Perkins Small Cap or generate 10.93% return on investment over 90 days.

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

Largecap Value Fund  vs.  Perkins Small Cap

Largecap Value

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Largecap Value Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Largecap Value may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Perkins Small Cap

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Perkins Small Cap are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Perkins Small may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Largecap Value and Perkins Small

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

The idea behind Largecap Value Fund and Perkins Small 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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.