Correlation Between Small Cap and Stifel Financial
Can any of the company-specific risk be diversified away by investing in both Small Cap and Stifel Financial 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 Stifel Financial 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 Stifel Financial, you can compare the effects of market volatilities on Small Cap and Stifel Financial 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 Stifel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Stifel Financial.
Diversification Opportunities for Small Cap and Stifel Financial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Stifel is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial 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 Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of Small Cap i.e., Small Cap and Stifel Financial go up and down completely randomly.
Pair Corralation between Small Cap and Stifel Financial
Assuming the 90 days horizon Small Cap is expected to generate 2.35 times less return on investment than Stifel Financial. But when comparing it to its historical volatility, Small Cap Core is 1.23 times less risky than Stifel Financial. It trades about 0.09 of its potential returns per unit of risk. Stifel Financial is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 6,007 in Stifel Financial on August 26, 2024 and sell it today you would earn a total of 5,615 from holding Stifel Financial or generate 93.47% 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. Stifel Financial
Performance |
| Timeline |
| Small Cap Core |
| Stifel Financial |
Small Cap and Stifel Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Stifel Financial
The main advantage of trading using opposite Small Cap and Stifel Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Stifel Financial 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 Stifel Financial will offset losses from the drop in Stifel Financial'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 |
| Stifel Financial vs. Raymond James Financial | Stifel Financial vs. Evercore Partners | Stifel Financial vs. Selective Insurance Group | Stifel Financial vs. Reinsurance Group of |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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