Correlation Between Small Cap and Nomura Holdings
Can any of the company-specific risk be diversified away by investing in both Small Cap and Nomura Holdings 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 Nomura Holdings 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 Nomura Holdings ADR, you can compare the effects of market volatilities on Small Cap and Nomura Holdings 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 Nomura Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Nomura Holdings.
Diversification Opportunities for Small Cap and Nomura Holdings
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Small and Nomura is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Nomura Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomura Holdings ADR 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 Nomura Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomura Holdings ADR has no effect on the direction of Small Cap i.e., Small Cap and Nomura Holdings go up and down completely randomly.
Pair Corralation between Small Cap and Nomura Holdings
Assuming the 90 days horizon Small Cap Core is expected to generate 0.57 times more return on investment than Nomura Holdings. However, Small Cap Core is 1.74 times less risky than Nomura Holdings. It trades about 0.07 of its potential returns per unit of risk. Nomura Holdings ADR is currently generating about 0.01 per unit of risk. If you would invest 1,293 in Small Cap Core on August 24, 2024 and sell it today you would earn a total of 145.00 from holding Small Cap Core or generate 11.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Nomura Holdings ADR
Performance |
| Timeline |
| Small Cap Core |
| Nomura Holdings ADR |
Small Cap and Nomura Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Nomura Holdings
The main advantage of trading using opposite Small Cap and Nomura Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Nomura Holdings 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 Nomura Holdings will offset losses from the drop in Nomura Holdings' long position.| Small Cap vs. Vanguard Mid Cap Index | Small Cap vs. Vanguard Total Bond | Small Cap vs. Vanguard Institutional Index | Small Cap vs. Vanguard Total International |
| Nomura Holdings vs. SCOR PK | Nomura Holdings vs. Aquagold International | Nomura Holdings vs. Small Cap Core | Nomura Holdings vs. Morningstar Unconstrained Allocation |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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