Correlation Between Small Cap and Shimano
Can any of the company-specific risk be diversified away by investing in both Small Cap and Shimano 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 Shimano 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 Shimano Inc ADR, you can compare the effects of market volatilities on Small Cap and Shimano 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 Shimano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Shimano.
Diversification Opportunities for Small Cap and Shimano
Excellent diversification
The 3 months correlation between Small and Shimano is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Shimano Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shimano Inc 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 Shimano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shimano Inc ADR has no effect on the direction of Small Cap i.e., Small Cap and Shimano go up and down completely randomly.
Pair Corralation between Small Cap and Shimano
Assuming the 90 days horizon Small Cap Core is expected to generate 0.9 times more return on investment than Shimano. However, Small Cap Core is 1.11 times less risky than Shimano. It trades about 0.13 of its potential returns per unit of risk. Shimano Inc ADR is currently generating about -0.33 per unit of risk. If you would invest 1,374 in Small Cap Core on August 24, 2024 and sell it today you would earn a total of 62.00 from holding Small Cap Core or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Shimano Inc ADR
Performance |
| Timeline |
| Small Cap Core |
| Shimano Inc ADR |
Small Cap and Shimano Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Shimano
The main advantage of trading using opposite Small Cap and Shimano positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Shimano 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 Shimano will offset losses from the drop in Shimano's long position.| Small Cap vs. Ab Government Exchange | Small Cap vs. Us Government Securities | Small Cap vs. John Hancock Government | Small Cap vs. Virtus Seix Government |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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