Correlation Between Small Company and Cref Money
Can any of the company-specific risk be diversified away by investing in both Small Company and Cref Money 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 Cref Money 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 Cref Money Market, you can compare the effects of market volatilities on Small Company and Cref Money 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 Cref Money. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Cref Money.
Diversification Opportunities for Small Company and Cref Money
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Cref is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Cref Money Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cref Money Market 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 Cref Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cref Money Market has no effect on the direction of Small Company i.e., Small Company and Cref Money go up and down completely randomly.
Pair Corralation between Small Company and Cref Money
Assuming the 90 days horizon Small Pany Growth is expected to generate 103.39 times more return on investment than Cref Money. However, Small Company is 103.39 times more volatile than Cref Money Market. It trades about 0.13 of its potential returns per unit of risk. Cref Money Market is currently generating about 1.02 per unit of risk. If you would invest 1,050 in Small Pany Growth on November 1, 2024 and sell it today you would earn a total of 43.00 from holding Small Pany Growth or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Pany Growth vs. Cref Money Market
Performance |
| Timeline |
| Small Pany Growth |
| Cref Money Market |
Small Company and Cref Money Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Company and Cref Money
The main advantage of trading using opposite Small Company and Cref Money positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Company position performs unexpectedly, Cref Money 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 Cref Money will offset losses from the drop in Cref Money's long position.| Small Company vs. Mid Cap Growth | Small Company vs. Morgan Stanley Multi | Small Company vs. Growth Portfolio Class | Small Company vs. Amer Beacon Ark |
| Cref Money vs. Artisan High Income | Cref Money vs. Needham Aggressive Growth | Cref Money vs. Msift High Yield | Cref Money vs. Ab High 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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