Correlation Between Ultra-small Company and Oberweis Micro-cap
Can any of the company-specific risk be diversified away by investing in both Ultra-small Company and Oberweis Micro-cap 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 Oberweis Micro-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultra Small Pany Fund and Oberweis Micro Cap Fund, you can compare the effects of market volatilities on Ultra-small Company and Oberweis Micro-cap 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 Oberweis Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultra-small Company and Oberweis Micro-cap.
Diversification Opportunities for Ultra-small Company and Oberweis Micro-cap
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Ultra-small and Oberweis is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Small Pany Fund and Oberweis Micro Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oberweis Micro Cap 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 Fund are associated (or correlated) with Oberweis Micro-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oberweis Micro Cap has no effect on the direction of Ultra-small Company i.e., Ultra-small Company and Oberweis Micro-cap go up and down completely randomly.
Pair Corralation between Ultra-small Company and Oberweis Micro-cap
Assuming the 90 days horizon Ultra Small Pany Fund is expected to generate 1.0 times more return on investment than Oberweis Micro-cap. However, Ultra-small Company is 1.0 times more volatile than Oberweis Micro Cap Fund. It trades about 0.32 of its potential returns per unit of risk. Oberweis Micro Cap Fund is currently generating about 0.31 per unit of risk. If you would invest 3,013 in Ultra Small Pany Fund on August 30, 2024 and sell it today you would earn a total of 343.00 from holding Ultra Small Pany Fund or generate 11.38% 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 Fund vs. Oberweis Micro Cap Fund
Performance |
| Timeline |
| Ultra-small Company |
| Oberweis Micro Cap |
Ultra-small Company and Oberweis Micro-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultra-small Company and Oberweis Micro-cap
The main advantage of trading using opposite Ultra-small Company and Oberweis Micro-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultra-small Company position performs unexpectedly, Oberweis Micro-cap 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 Oberweis Micro-cap will offset losses from the drop in Oberweis Micro-cap's long position.The idea behind Ultra Small Pany Fund and Oberweis Micro Cap Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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