Correlation Between Perkins Small and Stock Index

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

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

Diversification Opportunities for Perkins Small and Stock Index

-0.15

Correlation Coefficient

Perkins Small  Stock Index

Good diversification

The 3 months correlation between Perkins and Stock is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Perkins Small Cap and Stock Index Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stock Index Fund and Perkins 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 Perkins Small Cap are associated (or correlated) with Stock Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stock Index Fund has no effect on the direction of Perkins Small i.e., Perkins Small and Stock Index go up and down completely randomly.

Pair Corralation between Perkins Small and Stock Index

Assuming the 90 days horizon Perkins Small Cap is expected to under-perform the Stock Index. In addition to that, Perkins Small is 1.26 times more volatile than Stock Index Fund. It trades about 0.0 of its total potential returns per unit of risk. Stock Index Fund is currently generating about 0.08 per unit of volatility. If you would invest  6,401  in Stock Index Fund on August 26, 2025 and sell it today you would earn a total of  253.00  from holding Stock Index Fund or generate 3.95% return on investment over 90 days.

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

Perkins Small Cap  vs.  Stock Index Fund

Perkins Small Cap

Risk-Adjusted Performance

Weakest

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

Stock Index Fund

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Stock Index Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Stock Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Perkins Small and Stock Index

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

The idea behind Perkins Small Cap and Stock Index 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.