Correlation Between James Small and James Micro
Can any of the company-specific risk be diversified away by investing in both James Small and James Micro 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 James Small and James Micro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between James Small Cap and James Micro Cap, you can compare the effects of market volatilities on James Small and James Micro 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 James Small with a short position of James Micro. Check out your portfolio center. Please also check ongoing floating volatility patterns of James Small and James Micro.
Diversification Opportunities for James Small and James Micro
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between James and James is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding James Small Cap and James Micro Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Micro Cap and James Small 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 James Small Cap are associated (or correlated) with James Micro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Micro Cap has no effect on the direction of James Small i.e., James Small and James Micro go up and down completely randomly.
Pair Corralation between James Small and James Micro
Assuming the 90 days horizon James Small Cap is expected to generate 0.72 times more return on investment than James Micro. However, James Small Cap is 1.38 times less risky than James Micro. It trades about 0.24 of its potential returns per unit of risk. James Micro Cap is currently generating about 0.15 per unit of risk. If you would invest 4,069 in James Small Cap on August 30, 2024 and sell it today you would earn a total of 331.00 from holding James Small Cap or generate 8.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
James Small Cap vs. James Micro Cap
Performance |
| Timeline |
| James Small Cap |
| James Micro Cap |
James Small and James Micro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with James Small and James Micro
The main advantage of trading using opposite James Small and James Micro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if James Small position performs unexpectedly, James Micro 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 James Micro will offset losses from the drop in James Micro's long position.| James Small vs. James Balanced Golden | James Small vs. Sterling Capital Stratton | James Small vs. Perritt Microcap Opportunities | James Small vs. Royce Smaller Companies Growth |
| James Micro vs. Driehaus Micro Cap | James Micro vs. Victory Integrity Discovery | James Micro vs. Zacks Small Cap E | James Micro vs. Towle Deep Value |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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