Correlation Between Small Company and Global Hard
Can any of the company-specific risk be diversified away by investing in both Small Company and Global Hard 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 and Global Hard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Pany Growth and Global Hard Assets, you can compare the effects of market volatilities on Small Company and Global Hard 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 with a short position of Global Hard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Global Hard.
Diversification Opportunities for Small Company and Global Hard
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Small and Global is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Global Hard Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hard Assets and Small Company 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 Pany Growth are associated (or correlated) with Global Hard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hard Assets has no effect on the direction of Small Company i.e., Small Company and Global Hard go up and down completely randomly.
Pair Corralation between Small Company and Global Hard
Assuming the 90 days horizon Small Pany Growth is expected to under-perform the Global Hard. In addition to that, Small Company is 1.93 times more volatile than Global Hard Assets. It trades about -0.05 of its total potential returns per unit of risk. Global Hard Assets is currently generating about 0.0 per unit of volatility. If you would invest 3,187 in Global Hard Assets on November 27, 2024 and sell it today you would lose (3.00) from holding Global Hard Assets or give up 0.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Pany Growth vs. Global Hard Assets
Performance |
| Timeline |
| Small Pany Growth |
| Global Hard Assets |
Small Company and Global Hard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Company and Global Hard
The main advantage of trading using opposite Small Company and Global Hard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Company position performs unexpectedly, Global Hard 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 Global Hard will offset losses from the drop in Global Hard's long position.| Small Company vs. Mid Cap Growth | Small Company vs. Growth Portfolio Class | Small Company vs. Morgan Stanley Multi | Small Company vs. Emerging Markets Portfolio |
| Global Hard vs. Tax Managed Large Cap | Global Hard vs. Blackrock Large Cap | Global Hard vs. Vest Large Cap | Global Hard vs. Neiman Large Cap |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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