Correlation Between Avantis Small and DB Base

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

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

Diversification Opportunities for Avantis Small and DB Base

0.0

Correlation Coefficient

Avantis Small  DB Base

Pay attention - limited upside

The 3 months correlation between Avantis and BDDXF is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Avantis Small Cap and DB Base Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DB Base Metals and Avantis Small 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 Avantis Small Cap are associated (or correlated) with DB Base. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DB Base Metals has no effect on the direction of Avantis Small i.e., Avantis Small and DB Base go up and down completely randomly.

Pair Corralation between Avantis Small and DB Base

Given the investment horizon of 90 days Avantis Small Cap is expected to generate 0.52 times more return on investment than DB Base. However, Avantis Small Cap is 1.92 times less risky than DB Base. It trades about 0.03 of its potential returns per unit of risk. DB Base Metals is currently generating about -0.04 per unit of risk. If you would invest  7,684  in Avantis Small Cap on January 24, 2024 and sell it today you would earn a total of  1,204  from holding Avantis Small Cap or generate 15.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.15%
Values	Daily Returns

Avantis Small Cap  vs.  DB Base Metals

Avantis Small Cap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avantis Small Cap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Avantis Small is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

DB Base Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DB Base Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DB Base is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Avantis Small and DB Base

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

The idea behind Avantis Small Cap and DB Base Metals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.