Correlation Between Small Cap and Advisors Capital
Can any of the company-specific risk be diversified away by investing in both Small Cap and Advisors Capital 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 Small Cap and Advisors Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and Advisors Capital Tactical, you can compare the effects of market volatilities on Small Cap and Advisors Capital 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 Small Cap with a short position of Advisors Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Advisors Capital.
Diversification Opportunities for Small Cap and Advisors Capital
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Advisors is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Advisors Capital Tactical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advisors Capital Tactical and Small Cap 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 Small Cap Core are associated (or correlated) with Advisors Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advisors Capital Tactical has no effect on the direction of Small Cap i.e., Small Cap and Advisors Capital go up and down completely randomly.
Pair Corralation between Small Cap and Advisors Capital
Assuming the 90 days horizon Small Cap Core is expected to generate 4.05 times more return on investment than Advisors Capital. However, Small Cap is 4.05 times more volatile than Advisors Capital Tactical. It trades about 0.06 of its potential returns per unit of risk. Advisors Capital Tactical is currently generating about 0.07 per unit of risk. If you would invest 1,293 in Small Cap Core on August 27, 2024 and sell it today you would earn a total of 193.00 from holding Small Cap Core or generate 14.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Advisors Capital Tactical
Performance |
| Timeline |
| Small Cap Core |
| Advisors Capital Tactical |
Small Cap and Advisors Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Advisors Capital
The main advantage of trading using opposite Small Cap and Advisors Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Advisors Capital 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 Advisors Capital will offset losses from the drop in Advisors Capital's long position.| Small Cap vs. Pro Blend Moderate Term | Small Cap vs. Hartford Moderate Allocation | Small Cap vs. Qs Moderate Growth | Small Cap vs. Dimensional Retirement Income |
| Advisors Capital vs. Emerging Markets Fund | Advisors Capital vs. Equity Growth Fund | Advisors Capital vs. Global Growth Fund | Advisors Capital vs. Small Pany Fund |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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