Correlation Between Small Cap and New Alternatives
Can any of the company-specific risk be diversified away by investing in both Small Cap and New Alternatives 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 New Alternatives 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 New Alternatives Fund, you can compare the effects of market volatilities on Small Cap and New Alternatives 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 New Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and New Alternatives.
Diversification Opportunities for Small Cap and New Alternatives
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and New is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and New Alternatives Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Alternatives 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 New Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Alternatives has no effect on the direction of Small Cap i.e., Small Cap and New Alternatives go up and down completely randomly.
Pair Corralation between Small Cap and New Alternatives
Assuming the 90 days horizon Small Cap Core is expected to generate 1.14 times more return on investment than New Alternatives. However, Small Cap is 1.14 times more volatile than New Alternatives Fund. It trades about 0.06 of its potential returns per unit of risk. New Alternatives Fund is currently generating about -0.01 per unit of risk. If you would invest 1,093 in Small Cap Core on August 26, 2024 and sell it today you would earn a total of 393.00 from holding Small Cap Core or generate 35.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. New Alternatives Fund
Performance |
| Timeline |
| Small Cap Core |
| New Alternatives |
Small Cap and New Alternatives Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and New Alternatives
The main advantage of trading using opposite Small Cap and New Alternatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, New Alternatives 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 New Alternatives will offset losses from the drop in New Alternatives' 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 |
| New Alternatives vs. New Alternatives Fund | New Alternatives vs. Alternative Credit Income | New Alternatives vs. Vaughan Nelson Select | New Alternatives vs. Industrials Portfolio Industrials |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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