Correlation Between Small Cap and Ab Small
Can any of the company-specific risk be diversified away by investing in both Small Cap and Ab Small 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 Ab Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Ab Small Cap, you can compare the effects of market volatilities on Small Cap and Ab Small 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 Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Ab Small.
Diversification Opportunities for Small Cap and Ab Small
Poor diversification
The 3 months correlation between SMALL and QUAIX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap 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 Value are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Small Cap i.e., Small Cap and Ab Small go up and down completely randomly.
Pair Corralation between Small Cap and Ab Small
Assuming the 90 days horizon Small Cap is expected to generate 1.35 times less return on investment than Ab Small. But when comparing it to its historical volatility, Small Cap Value is 1.1 times less risky than Ab Small. It trades about 0.1 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,993 in Ab Small Cap on August 25, 2024 and sell it today you would earn a total of 2,693 from holding Ab Small Cap or generate 53.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Small Cap Value vs. Ab Small Cap
Performance |
| Timeline |
| Small Cap Value |
| Ab Small Cap |
Small Cap and Ab Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Ab Small
The main advantage of trading using opposite Small Cap and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Ab Small 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 Ab Small will offset losses from the drop in Ab Small's long position.| Small Cap vs. Regional Bank Fund | Small Cap vs. Regional Bank Fund | Small Cap vs. Multimanager Lifestyle Moderate | Small Cap vs. Multimanager Lifestyle Balanced |
| Ab Small vs. The Hartford Equity | Ab Small vs. Dodge International Stock | Ab Small vs. Rbc Global Equity | Ab Small vs. Gmo Global Equity |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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