Correlation Between Paradigm Micro and Paradigm Select

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

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

Diversification Opportunities for Paradigm Micro and Paradigm Select

0.71

Correlation Coefficient

Paradigm Micro  Paradigm Select

Poor diversification

The 3 months correlation between Paradigm and Paradigm is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Paradigm Micro Cap Fund and Paradigm Select Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Select and Paradigm Micro 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 Paradigm Micro Cap Fund are associated (or correlated) with Paradigm Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Select has no effect on the direction of Paradigm Micro i.e., Paradigm Micro and Paradigm Select go up and down completely randomly.

Pair Corralation between Paradigm Micro and Paradigm Select

Assuming the 90 days horizon Paradigm Micro is expected to generate 1.15 times less return on investment than Paradigm Select. In addition to that, Paradigm Micro is 1.25 times more volatile than Paradigm Select Fund. It trades about 0.12 of its total potential returns per unit of risk. Paradigm Select Fund is currently generating about 0.17 per unit of volatility. If you would invest  6,823  in Paradigm Select Fund on April 30, 2025 and sell it today you would earn a total of  959.00  from holding Paradigm Select Fund or generate 14.06% return on investment over 90 days.

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

Paradigm Micro Cap Fund  vs.  Paradigm Select Fund

Paradigm Micro Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Paradigm Micro Cap Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Paradigm Micro may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Paradigm Select

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Paradigm Select Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Paradigm Select showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paradigm Micro and Paradigm Select

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

The idea behind Paradigm Micro Cap Fund and Paradigm Select Fund 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.