Correlation Between Perritt Microcap and Paradigm Value

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Can any of the company-specific risk be diversified away by investing in both Perritt Microcap and Paradigm Value 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 Perritt Microcap and Paradigm Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Perritt Microcap Opportunities and Paradigm Value Fund, you can compare the effects of market volatilities on Perritt Microcap and Paradigm Value 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 Perritt Microcap with a short position of Paradigm Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Perritt Microcap and Paradigm Value.

Diversification Opportunities for Perritt Microcap and Paradigm Value

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between Perritt and Paradigm is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Perritt Microcap Opportunities and Paradigm Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Value and Perritt Microcap 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 Perritt Microcap Opportunities are associated (or correlated) with Paradigm Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Value has no effect on the direction of Perritt Microcap i.e., Perritt Microcap and Paradigm Value go up and down completely randomly.

Pair Corralation between Perritt Microcap and Paradigm Value

Assuming the 90 days horizon Perritt Microcap Opportunities is expected to generate 0.85 times more return on investment than Paradigm Value. However, Perritt Microcap Opportunities is 1.17 times less risky than Paradigm Value. It trades about 0.22 of its potential returns per unit of risk. Paradigm Value Fund is currently generating about 0.18 per unit of risk. If you would invest  2,419  in Perritt Microcap Opportunities on August 31, 2024 and sell it today you would earn a total of  153.00  from holding Perritt Microcap Opportunities or generate 6.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Perritt Microcap Opportunities  vs.  Paradigm Value Fund

 Performance 
       Timeline  
Perritt Microcap Opp 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Perritt Microcap Opportunities are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Perritt Microcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Paradigm Value 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Paradigm Value Fund are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Paradigm Value may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Perritt Microcap and Paradigm Value Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Perritt Microcap and Paradigm Value

The main advantage of trading using opposite Perritt Microcap and Paradigm Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perritt Microcap position performs unexpectedly, Paradigm Value 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 Paradigm Value will offset losses from the drop in Paradigm Value's long position.
The idea behind Perritt Microcap Opportunities and Paradigm Value Fund 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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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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