Correlation Between Small Cap and Wcm China
Can any of the company-specific risk be diversified away by investing in both Small Cap and Wcm China 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 Wcm China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Wcm China Quality, you can compare the effects of market volatilities on Small Cap and Wcm China 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 Wcm China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Wcm China.
Diversification Opportunities for Small Cap and Wcm China
Modest diversification
The 3 months correlation between Small and Wcm is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Wcm China Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wcm China Quality 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 Equity are associated (or correlated) with Wcm China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wcm China Quality has no effect on the direction of Small Cap i.e., Small Cap and Wcm China go up and down completely randomly.
Pair Corralation between Small Cap and Wcm China
Assuming the 90 days horizon Small Cap Equity is expected to generate 1.09 times more return on investment than Wcm China. However, Small Cap is 1.09 times more volatile than Wcm China Quality. It trades about 0.3 of its potential returns per unit of risk. Wcm China Quality is currently generating about -0.12 per unit of risk. If you would invest 1,839 in Small Cap Equity on September 2, 2024 and sell it today you would earn a total of 192.00 from holding Small Cap Equity or generate 10.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Wcm China Quality
Performance |
| Timeline |
| Small Cap Equity |
| Wcm China Quality |
Small Cap and Wcm China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Wcm China
The main advantage of trading using opposite Small Cap and Wcm China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Wcm China 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 Wcm China will offset losses from the drop in Wcm China's long position.| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
| Wcm China vs. Huber Capital Equity | Wcm China vs. Small Cap Equity | Wcm China vs. Artisan Select Equity | Wcm China vs. Jpmorgan Equity Income |
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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