Correlation Between Small Company and Jensen Quality
Can any of the company-specific risk be diversified away by investing in both Small Company and Jensen Quality 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 Company and Jensen Quality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Pany Fund and Jensen Quality Value, you can compare the effects of market volatilities on Small Company and Jensen Quality 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 Company with a short position of Jensen Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Jensen Quality.
Diversification Opportunities for Small Company and Jensen Quality
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Small and Jensen is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Fund and Jensen Quality Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jensen Quality Value and Small Company 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 Pany Fund are associated (or correlated) with Jensen Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jensen Quality Value has no effect on the direction of Small Company i.e., Small Company and Jensen Quality go up and down completely randomly.
Pair Corralation between Small Company and Jensen Quality
Assuming the 90 days horizon Small Company is expected to generate 2.1 times less return on investment than Jensen Quality. But when comparing it to its historical volatility, Small Pany Fund is 1.38 times less risky than Jensen Quality. It trades about 0.05 of its potential returns per unit of risk. Jensen Quality Value is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,549 in Jensen Quality Value on August 30, 2025 and sell it today you would earn a total of 107.00 from holding Jensen Quality Value or generate 6.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Pany Fund vs. Jensen Quality Value
Performance |
| Timeline |
| Small Pany Fund |
| Jensen Quality Value |
Small Company and Jensen Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Company and Jensen Quality
The main advantage of trading using opposite Small Company and Jensen Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Company position performs unexpectedly, Jensen Quality 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 Jensen Quality will offset losses from the drop in Jensen Quality's long position.| Small Company vs. Pace Strategic Fixed | Small Company vs. Franklin High Yield | Small Company vs. Nuveen High Yield | Small Company vs. Maryland Tax Free Bond |
| Jensen Quality vs. Vanguard High Yield Tax Exempt | Jensen Quality vs. Rbb Fund | Jensen Quality vs. Gmo Quality Fund | Jensen Quality vs. Federated Municipal High |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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