Correlation Between Small Cap and Frost Kempner
Can any of the company-specific risk be diversified away by investing in both Small Cap and Frost Kempner 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 Frost Kempner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Frost Kempner Treasury, you can compare the effects of market volatilities on Small Cap and Frost Kempner 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 Frost Kempner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Frost Kempner.
Diversification Opportunities for Small Cap and Frost Kempner
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between SMALL and Frost is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Frost Kempner Treasury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Kempner Treasury 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 Value are associated (or correlated) with Frost Kempner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Kempner Treasury has no effect on the direction of Small Cap i.e., Small Cap and Frost Kempner go up and down completely randomly.
Pair Corralation between Small Cap and Frost Kempner
Assuming the 90 days horizon Small Cap Value is expected to generate 11.25 times more return on investment than Frost Kempner. However, Small Cap is 11.25 times more volatile than Frost Kempner Treasury. It trades about 0.15 of its potential returns per unit of risk. Frost Kempner Treasury is currently generating about 0.07 per unit of risk. If you would invest 1,044 in Small Cap Value on November 4, 2024 and sell it today you would earn a total of 29.00 from holding Small Cap Value or generate 2.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Frost Kempner Treasury
Performance |
| Timeline |
| Small Cap Value |
| Frost Kempner Treasury |
Small Cap and Frost Kempner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Frost Kempner
The main advantage of trading using opposite Small Cap and Frost Kempner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Frost Kempner 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 Frost Kempner will offset losses from the drop in Frost Kempner's long position.| Small Cap vs. Value Fund Investor | Small Cap vs. Small Pany Fund | Small Cap vs. Mid Cap Value | Small Cap vs. Equity Income Fund |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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