Correlation Between Ultra-small Company and Aggressive Investors
Can any of the company-specific risk be diversified away by investing in both Ultra-small Company and Aggressive Investors 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 Ultra-small Company and Aggressive Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Small Pany Market and Aggressive Investors 1, you can compare the effects of market volatilities on Ultra-small Company and Aggressive Investors 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 Ultra-small Company with a short position of Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra-small Company and Aggressive Investors.
Diversification Opportunities for Ultra-small Company and Aggressive Investors
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between ULTRA-SMALL and Aggressive is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Small Pany Market and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors and Ultra-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 Ultra Small Pany Market are associated (or correlated) with Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of Ultra-small Company i.e., Ultra-small Company and Aggressive Investors go up and down completely randomly.
Pair Corralation between Ultra-small Company and Aggressive Investors
Assuming the 90 days horizon Ultra-small Company is expected to generate 1.45 times less return on investment than Aggressive Investors. In addition to that, Ultra-small Company is 1.56 times more volatile than Aggressive Investors 1. It trades about 0.07 of its total potential returns per unit of risk. Aggressive Investors 1 is currently generating about 0.16 per unit of volatility. If you would invest 8,359 in Aggressive Investors 1 on September 3, 2024 and sell it today you would earn a total of 2,125 from holding Aggressive Investors 1 or generate 25.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ultra Small Pany Market vs. Aggressive Investors 1
Performance |
| Timeline |
| Ultra-small Company |
| Aggressive Investors |
Ultra-small Company and Aggressive Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra-small Company and Aggressive Investors
The main advantage of trading using opposite Ultra-small Company and Aggressive Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra-small Company position performs unexpectedly, Aggressive Investors 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 Aggressive Investors will offset losses from the drop in Aggressive Investors' long position.| Ultra-small Company vs. Ultra Small Pany Fund | Ultra-small Company vs. Small Cap Value Fund | Ultra-small Company vs. Aggressive Investors 1 | Ultra-small Company vs. American Beacon Bridgeway |
| Aggressive Investors vs. Aggressive Balanced Allocation | Aggressive Investors vs. Aggressive Growth Fund | Aggressive Investors vs. Aggressive Growth Allocation |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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