Correlation Between Pro Dex and Small Cap
Can any of the company-specific risk be diversified away by investing in both Pro Dex 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 Pro Dex and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pro Dex and Small Cap Core, you can compare the effects of market volatilities on Pro Dex 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 Pro Dex with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pro Dex and Small Cap.
Diversification Opportunities for Pro Dex and Small Cap
Poor diversification
The 3 months correlation between Pro and Small is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Pro Dex 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 Pro Dex 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 Pro Dex 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 Pro Dex i.e., Pro Dex and Small Cap go up and down completely randomly.
Pair Corralation between Pro Dex and Small Cap
Given the investment horizon of 90 days Pro Dex is expected to generate 2.8 times more return on investment than Small Cap. However, Pro Dex is 2.8 times more volatile than Small Cap Core. It trades about 0.14 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.08 per unit of risk. If you would invest 1,634 in Pro Dex on August 27, 2024 and sell it today you would earn a total of 3,041 from holding Pro Dex or generate 186.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pro Dex vs. Small Cap Core
Performance |
| Timeline |
| Pro Dex |
| Small Cap Core |
Pro Dex and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pro Dex and Small Cap
The main advantage of trading using opposite Pro Dex and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pro Dex 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.| Pro Dex vs. Coloplast A | Pro Dex vs. Straumann Holding AG | Pro Dex vs. Nephros | Pro Dex vs. InfuSystems Holdings |
| Small Cap vs. Pace High Yield | Small Cap vs. Needham Aggressive Growth | Small Cap vs. Metropolitan West High | Small Cap vs. Pioneer 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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