Correlation Between Associated Capital and Royce Micro
Can any of the company-specific risk be diversified away by investing in both Associated Capital and Royce Micro 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 Associated Capital and Royce Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated Capital Group and Royce Micro Cap, you can compare the effects of market volatilities on Associated Capital and Royce Micro 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 Associated Capital with a short position of Royce Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated Capital and Royce Micro.
Diversification Opportunities for Associated Capital and Royce Micro
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Associated and Royce is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Associated Capital Group and Royce Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royce Micro Cap and Associated Capital 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 Associated Capital Group are associated (or correlated) with Royce Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royce Micro Cap has no effect on the direction of Associated Capital i.e., Associated Capital and Royce Micro go up and down completely randomly.
Pair Corralation between Associated Capital and Royce Micro
Allowing for the 90-day total investment horizon Associated Capital is expected to generate 1.4 times less return on investment than Royce Micro. In addition to that, Associated Capital is 1.22 times more volatile than Royce Micro Cap. It trades about 0.04 of its total potential returns per unit of risk. Royce Micro Cap is currently generating about 0.07 per unit of volatility. If you would invest 859.00 in Royce Micro Cap on September 3, 2024 and sell it today you would earn a total of 173.00 from holding Royce Micro Cap or generate 20.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated Capital Group vs. Royce Micro Cap
Performance |
| Timeline |
| Associated Capital |
| Royce Micro Cap |
Associated Capital and Royce Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated Capital and Royce Micro
The main advantage of trading using opposite Associated Capital and Royce Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated Capital position performs unexpectedly, Royce Micro 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 Royce Micro will offset losses from the drop in Royce Micro's long position.| Associated Capital vs. Abrdn Emerging Markets | Associated Capital vs. DWS Municipal Income | Associated Capital vs. Blackrock Muni Intermediate | Associated Capital vs. Blackrock Muniyield |
| Royce Micro vs. Tekla Healthcare Investors | Royce Micro vs. Allianzgi Equity Convertible | Royce Micro vs. Cohen Steers Qualityome | Royce Micro vs. Cohen Steers Reit |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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