Correlation Between Smallcap Growth and Preferred Securities
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Preferred Securities 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 Smallcap Growth and Preferred Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Growth Fund and Preferred Securities Fund, you can compare the effects of market volatilities on Smallcap Growth and Preferred Securities 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 Smallcap Growth with a short position of Preferred Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Preferred Securities.
Diversification Opportunities for Smallcap Growth and Preferred Securities
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smallcap and Preferred is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Preferred Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Securities and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Preferred Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Securities has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Preferred Securities go up and down completely randomly.
Pair Corralation between Smallcap Growth and Preferred Securities
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 9.18 times more return on investment than Preferred Securities. However, Smallcap Growth is 9.18 times more volatile than Preferred Securities Fund. It trades about 0.2 of its potential returns per unit of risk. Preferred Securities Fund is currently generating about -0.12 per unit of risk. If you would invest 1,605 in Smallcap Growth Fund on August 28, 2024 and sell it today you would earn a total of 102.00 from holding Smallcap Growth Fund or generate 6.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Smallcap Growth Fund vs. Preferred Securities Fund
Performance |
| Timeline |
| Smallcap Growth |
| Preferred Securities |
Smallcap Growth and Preferred Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Preferred Securities
The main advantage of trading using opposite Smallcap Growth and Preferred Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Preferred Securities 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 Preferred Securities will offset losses from the drop in Preferred Securities' long position.| Smallcap Growth vs. Ultra Short Term Fixed | Smallcap Growth vs. Nuveen Short Term | Smallcap Growth vs. Quantitative Longshort Equity | Smallcap Growth vs. Siit Ultra Short |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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