Correlation Between Small Cap and Argo Group

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

By analyzing existing cross correlation between Small Cap Premium and Argo Group 65, you can compare the effects of market volatilities on Small Cap and Argo Group 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 Small Cap with a short position of Argo Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Argo Group.

Diversification Opportunities for Small Cap and Argo Group

0.66

Correlation Coefficient

Small Cap  Argo Group

Poor diversification

The 3 months correlation between Small and Argo is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Argo Group 65 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argo Group 65 and Small Cap 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 Small Cap Premium are associated (or correlated) with Argo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argo Group 65 has no effect on the direction of Small Cap i.e., Small Cap and Argo Group go up and down completely randomly.

Pair Corralation between Small Cap and Argo Group

Considering the 90-day investment horizon Small Cap is expected to generate 15.28 times less return on investment than Argo Group. But when comparing it to its historical volatility, Small Cap Premium is 5.79 times less risky than Argo Group. It trades about 0.08 of its potential returns per unit of risk. Argo Group 65 is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,958  in Argo Group 65 on May 21, 2025 and sell it today you would earn a total of  573.00  from holding Argo Group 65 or generate 29.26% return on investment over 90 days.

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

Small Cap Premium  vs.  Argo Group 65

Small Cap Premium

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Argo Group 65

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Argo Group 65 are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Argo Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small Cap and Argo Group

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

The idea behind Small Cap Premium and Argo Group 65 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.