Correlation Between Small Cap and Driehaus Micro
Can any of the company-specific risk be diversified away by investing in both Small Cap and Driehaus 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 Small Cap and Driehaus Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth and Driehaus Micro Cap, you can compare the effects of market volatilities on Small Cap and Driehaus 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 Small Cap with a short position of Driehaus Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Driehaus Micro.
Diversification Opportunities for Small Cap and Driehaus Micro
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Driehaus is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Driehaus Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driehaus Micro Cap and Small Cap 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 Growth are associated (or correlated) with Driehaus Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driehaus Micro Cap has no effect on the direction of Small Cap i.e., Small Cap and Driehaus Micro go up and down completely randomly.
Pair Corralation between Small Cap and Driehaus Micro
Assuming the 90 days horizon Small Cap Growth is expected to generate 0.55 times more return on investment than Driehaus Micro. However, Small Cap Growth is 1.83 times less risky than Driehaus Micro. It trades about 0.24 of its potential returns per unit of risk. Driehaus Micro Cap is currently generating about -0.13 per unit of risk. If you would invest 1,908 in Small Cap Growth on November 4, 2024 and sell it today you would earn a total of 91.00 from holding Small Cap Growth or generate 4.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Driehaus Micro Cap
Performance |
| Timeline |
| Small Cap Growth |
| Driehaus Micro Cap |
Small Cap and Driehaus Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Driehaus Micro
The main advantage of trading using opposite Small Cap and Driehaus Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Driehaus 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 Driehaus Micro will offset losses from the drop in Driehaus Micro's long position.| Small Cap vs. Americafirst Large Cap | Small Cap vs. Fisher Large Cap | Small Cap vs. Qs Large Cap | Small Cap vs. Vest Large Cap |
| Driehaus Micro vs. Driehaus Emerging Markets | Driehaus Micro vs. Driehaus Emerging Markets | Driehaus Micro vs. Driehaus Emerging Markets | Driehaus Micro vs. Driehaus International Small |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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