Correlation Between Pear Tree and Sp Smallcap
Can any of the company-specific risk be diversified away by investing in both Pear Tree and Sp Smallcap 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 Pear Tree and Sp Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pear Tree Polaris and Sp Smallcap 600, you can compare the effects of market volatilities on Pear Tree and Sp Smallcap 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 Pear Tree with a short position of Sp Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pear Tree and Sp Smallcap.
Diversification Opportunities for Pear Tree and Sp Smallcap
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pear and RYYCX is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Pear Tree Polaris and Sp Smallcap 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap 600 and Pear Tree 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 Pear Tree Polaris are associated (or correlated) with Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap 600 has no effect on the direction of Pear Tree i.e., Pear Tree and Sp Smallcap go up and down completely randomly.
Pair Corralation between Pear Tree and Sp Smallcap
Assuming the 90 days horizon Pear Tree Polaris is expected to generate 0.53 times more return on investment than Sp Smallcap. However, Pear Tree Polaris is 1.9 times less risky than Sp Smallcap. It trades about 0.02 of its potential returns per unit of risk. Sp Smallcap 600 is currently generating about 0.0 per unit of risk. If you would invest 1,188 in Pear Tree Polaris on December 7, 2024 and sell it today you would earn a total of 38.00 from holding Pear Tree Polaris or generate 3.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pear Tree Polaris vs. Sp Smallcap 600
Performance |
| Timeline |
| Pear Tree Polaris |
| Sp Smallcap 600 |
Pear Tree and Sp Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pear Tree and Sp Smallcap
The main advantage of trading using opposite Pear Tree and Sp Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pear Tree position performs unexpectedly, Sp Smallcap 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 Sp Smallcap will offset losses from the drop in Sp Smallcap's long position.| Pear Tree vs. Global Technology Portfolio | ||
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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