Correlation Between Small-company Stock and Homestead Intermediate
Can any of the company-specific risk be diversified away by investing in both Small-company Stock and Homestead Intermediate 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-company Stock and Homestead Intermediate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Company Stock Fund and Homestead Intermediate Bond, you can compare the effects of market volatilities on Small-company Stock and Homestead Intermediate 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-company Stock with a short position of Homestead Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-company Stock and Homestead Intermediate.
Diversification Opportunities for Small-company Stock and Homestead Intermediate
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Small-company and Homestead is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Small Company Stock Fund and Homestead Intermediate Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homestead Intermediate and Small-company Stock 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 Company Stock Fund are associated (or correlated) with Homestead Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homestead Intermediate has no effect on the direction of Small-company Stock i.e., Small-company Stock and Homestead Intermediate go up and down completely randomly.
Pair Corralation between Small-company Stock and Homestead Intermediate
Assuming the 90 days horizon Small Company Stock Fund is expected to generate 4.27 times more return on investment than Homestead Intermediate. However, Small-company Stock is 4.27 times more volatile than Homestead Intermediate Bond. It trades about 0.28 of its potential returns per unit of risk. Homestead Intermediate Bond is currently generating about 0.06 per unit of risk. If you would invest 2,731 in Small Company Stock Fund on August 28, 2024 and sell it today you would earn a total of 260.00 from holding Small Company Stock Fund or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Company Stock Fund vs. Homestead Intermediate Bond
Performance |
| Timeline |
| Small-company Stock |
| Homestead Intermediate |
Small-company Stock and Homestead Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-company Stock and Homestead Intermediate
The main advantage of trading using opposite Small-company Stock and Homestead Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-company Stock position performs unexpectedly, Homestead Intermediate 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 Homestead Intermediate will offset losses from the drop in Homestead Intermediate's long position.| Small-company Stock vs. Homestead Intermediate Bond | Small-company Stock vs. Value Fund Value | Small-company Stock vs. Homestead Rural America | Small-company Stock vs. Pimco Dynamic 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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