Correlation Between Sp Smallcap and Strengthening Dollar
Can any of the company-specific risk be diversified away by investing in both Sp Smallcap and Strengthening Dollar 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 Sp Smallcap and Strengthening Dollar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp Smallcap 600 and Strengthening Dollar 2x, you can compare the effects of market volatilities on Sp Smallcap and Strengthening Dollar 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 Sp Smallcap with a short position of Strengthening Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Strengthening Dollar.
Diversification Opportunities for Sp Smallcap and Strengthening Dollar
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RYAZX and Strengthening is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 and Strengthening Dollar 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strengthening Dollar and Sp Smallcap 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 Sp Smallcap 600 are associated (or correlated) with Strengthening Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strengthening Dollar has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Strengthening Dollar go up and down completely randomly.
Pair Corralation between Sp Smallcap and Strengthening Dollar
Assuming the 90 days horizon Sp Smallcap 600 is expected to generate 1.67 times more return on investment than Strengthening Dollar. However, Sp Smallcap is 1.67 times more volatile than Strengthening Dollar 2x. It trades about 0.24 of its potential returns per unit of risk. Strengthening Dollar 2x is currently generating about 0.18 per unit of risk. If you would invest 19,919 in Sp Smallcap 600 on August 31, 2024 and sell it today you would earn a total of 1,931 from holding Sp Smallcap 600 or generate 9.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp Smallcap 600 vs. Strengthening Dollar 2x
Performance |
| Timeline |
| Sp Smallcap 600 |
| Strengthening Dollar |
Sp Smallcap and Strengthening Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp Smallcap and Strengthening Dollar
The main advantage of trading using opposite Sp Smallcap and Strengthening Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Smallcap position performs unexpectedly, Strengthening Dollar 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 Strengthening Dollar will offset losses from the drop in Strengthening Dollar's long position.| Sp Smallcap vs. Sp 500 Pure | Sp Smallcap vs. Sp Smallcap 600 | Sp Smallcap vs. Sp Midcap 400 | Sp Smallcap vs. Sp 500 Pure |
| Strengthening Dollar vs. Rising Dollar Profund | Strengthening Dollar vs. Strengthening Dollar 2x | Strengthening Dollar vs. Strengthening Dollar 2x | Strengthening Dollar vs. Short Real Estate |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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