Correlation Between Small-cap Value and Scharf Fund

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

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

Diversification Opportunities for Small-cap Value and Scharf Fund

0.8

Correlation Coefficient

Small-cap Value  Scharf Fund

Very poor diversification

The 3 months correlation between Small-cap and Scharf is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Scharf Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scharf Fund Institutional and Small-cap 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 Small Cap Value Profund are associated (or correlated) with Scharf Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scharf Fund Institutional has no effect on the direction of Small-cap Value i.e., Small-cap Value and Scharf Fund go up and down completely randomly.

Pair Corralation between Small-cap Value and Scharf Fund

Assuming the 90 days horizon Small Cap Value Profund is expected to under-perform the Scharf Fund. In addition to that, Small-cap Value is 1.56 times more volatile than Scharf Fund Institutional. It trades about -0.09 of its total potential returns per unit of risk. Scharf Fund Institutional is currently generating about -0.07 per unit of volatility. If you would invest  5,394  in Scharf Fund Institutional on February 1, 2025 and sell it today you would lose (178.00) from holding Scharf Fund Institutional or give up 3.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Small Cap Value Profund  vs.  Scharf Fund Institutional

Small Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Value Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Scharf Fund Institutional

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Small-cap Value and Scharf Fund

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

The idea behind Small Cap Value Profund and Scharf Fund Institutional 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.