Correlation Between Small Cap and Power Dividend
Can any of the company-specific risk be diversified away by investing in both Small Cap and Power Dividend 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 Power Dividend 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 Power Dividend Index, you can compare the effects of market volatilities on Small Cap and Power Dividend 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 Power Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Power Dividend.
Diversification Opportunities for Small Cap and Power Dividend
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SMALL and Power is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Power Dividend Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Dividend Index 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 Power Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Dividend Index has no effect on the direction of Small Cap i.e., Small Cap and Power Dividend go up and down completely randomly.
Pair Corralation between Small Cap and Power Dividend
Assuming the 90 days horizon Small Cap Value is expected to generate 1.91 times more return on investment than Power Dividend. However, Small Cap is 1.91 times more volatile than Power Dividend Index. It trades about 0.26 of its potential returns per unit of risk. Power Dividend Index is currently generating about 0.22 per unit of risk. If you would invest 1,108 in Small Cap Value on September 5, 2024 and sell it today you would earn a total of 107.00 from holding Small Cap Value or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Power Dividend Index
Performance |
| Timeline |
| Small Cap Value |
| Power Dividend Index |
Small Cap and Power Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Power Dividend
The main advantage of trading using opposite Small Cap and Power Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Power Dividend 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 Power Dividend will offset losses from the drop in Power Dividend's long position.| Small Cap vs. T Rowe Price | Small Cap vs. Legg Mason Partners | Small Cap vs. Jp Morgan Smartretirement | Small Cap vs. T Rowe Price |
| Power Dividend vs. Touchstone Small Cap | Power Dividend vs. Kinetics Small Cap | Power Dividend vs. Small Cap Value | Power Dividend vs. Baird Smallmid Cap |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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