Correlation Between Steward Covered and Steward Small
Can any of the company-specific risk be diversified away by investing in both Steward Covered and Steward Small 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 Steward Covered and Steward Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steward Ered Call and Steward Small Mid Cap, you can compare the effects of market volatilities on Steward Covered and Steward Small 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 Steward Covered with a short position of Steward Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steward Covered and Steward Small.
Diversification Opportunities for Steward Covered and Steward Small
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Steward and Steward is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Steward Ered Call and Steward Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steward Small Mid and Steward Covered 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 Steward Ered Call are associated (or correlated) with Steward Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steward Small Mid has no effect on the direction of Steward Covered i.e., Steward Covered and Steward Small go up and down completely randomly.
Pair Corralation between Steward Covered and Steward Small
Assuming the 90 days horizon Steward Covered is expected to generate 1.8 times less return on investment than Steward Small. But when comparing it to its historical volatility, Steward Ered Call is 1.89 times less risky than Steward Small. It trades about 0.07 of its potential returns per unit of risk. Steward Small Mid Cap is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,075 in Steward Small Mid Cap on August 25, 2024 and sell it today you would earn a total of 178.00 from holding Steward Small Mid Cap or generate 16.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steward Ered Call vs. Steward Small Mid Cap
Performance |
| Timeline |
| Steward Ered Call |
| Steward Small Mid |
Steward Covered and Steward Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steward Covered and Steward Small
The main advantage of trading using opposite Steward Covered and Steward Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steward Covered position performs unexpectedly, Steward Small 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 Steward Small will offset losses from the drop in Steward Small's long position.| Steward Covered vs. Pace Smallmedium Value | Steward Covered vs. Fidelity Small Cap | Steward Covered vs. Amg River Road | Steward Covered vs. Palm Valley Capital |
| Steward Small vs. Steward Large Cap | Steward Small vs. Steward Global E | Steward Small vs. Steward Select Bond | Steward Small vs. Steward Small Mid Cap |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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