Correlation Between Polar Capital and Small Cap
Can any of the company-specific risk be diversified away by investing in both Polar Capital 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 Polar Capital and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polar Capital Emerging and Small Cap Equity, you can compare the effects of market volatilities on Polar Capital 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 Polar Capital with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polar Capital and Small Cap.
Diversification Opportunities for Polar Capital and Small Cap
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Polar and Small is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Polar Capital Emerging and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Polar Capital 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 Polar Capital Emerging 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 Equity has no effect on the direction of Polar Capital i.e., Polar Capital and Small Cap go up and down completely randomly.
Pair Corralation between Polar Capital and Small Cap
Assuming the 90 days horizon Polar Capital Emerging is expected to generate 0.94 times more return on investment than Small Cap. However, Polar Capital Emerging is 1.06 times less risky than Small Cap. It trades about -0.05 of its potential returns per unit of risk. Small Cap Equity is currently generating about -0.3 per unit of risk. If you would invest 1,093 in Polar Capital Emerging on November 28, 2024 and sell it today you would lose (11.00) from holding Polar Capital Emerging or give up 1.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Polar Capital Emerging vs. Small Cap Equity
Performance |
| Timeline |
| Polar Capital Emerging |
| Small Cap Equity |
Polar Capital and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Polar Capital and Small Cap
The main advantage of trading using opposite Polar Capital and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polar Capital 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.| Polar Capital vs. Polar Capital Emerging | Polar Capital vs. Calvert Short Duration | Polar Capital vs. Buffalo High Yield | Polar Capital vs. Blackrock Low Duration |
| Small Cap vs. Baron Select Funds | Small Cap vs. Vanguard Information Technology | Small Cap vs. Dreyfus Technology Growth | Small Cap vs. Science Technology Fund |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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