Correlation Between Option Care and Small Cap
Can any of the company-specific risk be diversified away by investing in both Option Care 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 Option Care and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Option Care Health and Small Cap Core, you can compare the effects of market volatilities on Option Care 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 Option Care with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Option Care and Small Cap.
Diversification Opportunities for Option Care and Small Cap
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Option and Small is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Option Care Health and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Option Care 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 Option Care Health 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 Core has no effect on the direction of Option Care i.e., Option Care and Small Cap go up and down completely randomly.
Pair Corralation between Option Care and Small Cap
Given the investment horizon of 90 days Option Care Health is expected to generate 1.43 times more return on investment than Small Cap. However, Option Care is 1.43 times more volatile than Small Cap Core. It trades about 0.28 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.0 per unit of risk. If you would invest 2,916 in Option Care Health on November 18, 2024 and sell it today you would earn a total of 230.00 from holding Option Care Health or generate 7.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Option Care Health vs. Small Cap Core
Performance |
| Timeline |
| Option Care Health |
| Small Cap Core |
Option Care and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Option Care and Small Cap
The main advantage of trading using opposite Option Care and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Option Care 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.| Option Care vs. Addus HomeCare | Option Care vs. Acadia Healthcare | Option Care vs. Encompass Health Corp | Option Care vs. Select Medical Holdings |
| Small Cap vs. Arrow Managed Futures | Small Cap vs. Intal High Relative | Small Cap vs. Fbanjx | Small Cap vs. Ffcdax |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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