Correlation Between Alphacentric Municipal and Small Cap
Can any of the company-specific risk be diversified away by investing in both Alphacentric Municipal 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 Alphacentric Municipal and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alphacentric Municipal Opportunities and Small Cap Stock, you can compare the effects of market volatilities on Alphacentric Municipal 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 Alphacentric Municipal with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphacentric Municipal and Small Cap.
Diversification Opportunities for Alphacentric Municipal and Small Cap
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Alphacentric and Small is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Alphacentric Municipal Opportu and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Alphacentric Municipal 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 Alphacentric Municipal Opportunities 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 Stock has no effect on the direction of Alphacentric Municipal i.e., Alphacentric Municipal and Small Cap go up and down completely randomly.
Pair Corralation between Alphacentric Municipal and Small Cap
Assuming the 90 days horizon Alphacentric Municipal is expected to generate 6.74 times less return on investment than Small Cap. But when comparing it to its historical volatility, Alphacentric Municipal Opportunities is 4.13 times less risky than Small Cap. It trades about 0.03 of its potential returns per unit of risk. Small Cap Stock is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,213 in Small Cap Stock on September 12, 2024 and sell it today you would earn a total of 289.00 from holding Small Cap Stock or generate 23.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 53.62% |
| Values | Daily Returns |
Alphacentric Municipal Opportu vs. Small Cap Stock
Performance |
| Timeline |
| Alphacentric Municipal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Small Cap Stock |
Alphacentric Municipal and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alphacentric Municipal and Small Cap
The main advantage of trading using opposite Alphacentric Municipal and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphacentric Municipal 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 Alphacentric Municipal Opportunities and Small Cap Stock 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.
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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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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