Correlation Between Small Cap and Alphacentric Hedged
Can any of the company-specific risk be diversified away by investing in both Small Cap and Alphacentric Hedged 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 Alphacentric Hedged 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 Alphacentric Hedged Market, you can compare the effects of market volatilities on Small Cap and Alphacentric Hedged 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 Alphacentric Hedged. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Alphacentric Hedged.
Diversification Opportunities for Small Cap and Alphacentric Hedged
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Alphacentric is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Alphacentric Hedged Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphacentric Hedged 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 Alphacentric Hedged. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphacentric Hedged has no effect on the direction of Small Cap i.e., Small Cap and Alphacentric Hedged go up and down completely randomly.
Pair Corralation between Small Cap and Alphacentric Hedged
Assuming the 90 days horizon Small Cap Core is expected to generate 2.68 times more return on investment than Alphacentric Hedged. However, Small Cap is 2.68 times more volatile than Alphacentric Hedged Market. It trades about 0.23 of its potential returns per unit of risk. Alphacentric Hedged Market is currently generating about 0.12 per unit of risk. If you would invest 1,368 in Small Cap Core on August 26, 2024 and sell it today you would earn a total of 118.00 from holding Small Cap Core or generate 8.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Alphacentric Hedged Market
Performance |
| Timeline |
| Small Cap Core |
| Alphacentric Hedged |
Small Cap and Alphacentric Hedged Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Alphacentric Hedged
The main advantage of trading using opposite Small Cap and Alphacentric Hedged positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Alphacentric Hedged 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 Alphacentric Hedged will offset losses from the drop in Alphacentric Hedged's long position.| Small Cap vs. Pace High Yield | Small Cap vs. Needham Aggressive Growth | Small Cap vs. Metropolitan West High | Small Cap vs. Pioneer High Income |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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