Correlation Between Sachem Capital and Small Cap
Can any of the company-specific risk be diversified away by investing in both Sachem 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 Sachem 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 Sachem Capital Corp and Small Cap Premium, you can compare the effects of market volatilities on Sachem 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 Sachem Capital with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sachem Capital and Small Cap.
Diversification Opportunities for Sachem Capital and Small Cap
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sachem and Small is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Sachem Capital Corp and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium and Sachem 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 Sachem Capital Corp 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 Premium has no effect on the direction of Sachem Capital i.e., Sachem Capital and Small Cap go up and down completely randomly.
Pair Corralation between Sachem Capital and Small Cap
Given the investment horizon of 90 days Sachem Capital is expected to generate 7.08 times less return on investment than Small Cap. But when comparing it to its historical volatility, Sachem Capital Corp is 5.55 times less risky than Small Cap. It trades about 0.03 of its potential returns per unit of risk. Small Cap Premium is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,433 in Small Cap Premium on August 29, 2024 and sell it today you would earn a total of 13.00 from holding Small Cap Premium or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sachem Capital Corp vs. Small Cap Premium
Performance |
| Timeline |
| Sachem Capital Corp |
| Small Cap Premium |
Sachem Capital and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sachem Capital and Small Cap
The main advantage of trading using opposite Sachem Capital and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sachem 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.| Sachem Capital vs. Sachem Capital Corp | Sachem Capital vs. Eagle Point Credit | Sachem Capital vs. B Riley Financial |
| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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