Correlation Between Fm Investments and Small Cap
Can any of the company-specific risk be diversified away by investing in both Fm Investments and Small 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 Fm Investments and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fm Investments Large and Small Cap Equity, you can compare the effects of market volatilities on Fm Investments and Small 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 Fm Investments with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fm Investments and Small Cap.
Diversification Opportunities for Fm Investments and Small Cap
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IAFLX and Small is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Fm Investments Large and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Fm Investments 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 Fm Investments Large are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Fm Investments i.e., Fm Investments and Small Cap go up and down completely randomly.
Pair Corralation between Fm Investments and Small Cap
Assuming the 90 days horizon Fm Investments is expected to generate 1.12 times less return on investment than Small Cap. But when comparing it to its historical volatility, Fm Investments Large is 1.21 times less risky than Small Cap. It trades about 0.17 of its potential returns per unit of risk. Small Cap Equity is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,803 in Small Cap Equity on September 3, 2024 and sell it today you would earn a total of 228.00 from holding Small Cap Equity or generate 12.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fm Investments Large vs. Small Cap Equity
Performance |
| Timeline |
| Fm Investments Large |
| Small Cap Equity |
Fm Investments and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fm Investments and Small Cap
The main advantage of trading using opposite Fm Investments and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fm Investments position performs unexpectedly, Small 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 Small Cap will offset losses from the drop in Small Cap's long position.The idea behind Fm Investments Large and Small Cap Equity 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.| Small Cap vs. Semiconductor Ultrasector Profund | Small Cap vs. Qs Large Cap | Small Cap vs. Fm Investments Large | Small Cap vs. T Rowe Price |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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