Correlation Between Small Cap and Cable One
Can any of the company-specific risk be diversified away by investing in both Small Cap and Cable One 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 Cable One 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 Cable One, you can compare the effects of market volatilities on Small Cap and Cable One 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 Cable One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Cable One.
Diversification Opportunities for Small Cap and Cable One
Poor diversification
The 3 months correlation between Small and Cable is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Cable One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cable One 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 Cable One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cable One has no effect on the direction of Small Cap i.e., Small Cap and Cable One go up and down completely randomly.
Pair Corralation between Small Cap and Cable One
Assuming the 90 days horizon Small Cap Core is expected to generate 0.36 times more return on investment than Cable One. However, Small Cap Core is 2.75 times less risky than Cable One. It trades about 0.0 of its potential returns per unit of risk. Cable One is currently generating about -0.21 per unit of risk. If you would invest 1,237 in Small Cap Core on November 18, 2024 and sell it today you would lose (2.00) from holding Small Cap Core or give up 0.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Cable One
Performance |
| Timeline |
| Small Cap Core |
| Cable One |
Small Cap and Cable One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Cable One
The main advantage of trading using opposite Small Cap and Cable One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Cable One 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 Cable One will offset losses from the drop in Cable One's long position.| Small Cap vs. Arrow Managed Futures | Small Cap vs. Intal High Relative | Small Cap vs. Fbanjx | Small Cap vs. Ffcdax |
| Cable One vs. Liberty Broadband Srs | Cable One vs. Liberty Broadband Corp | Cable One vs. Telkom Indonesia Tbk | Cable One vs. Liberty Global PLC |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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