Correlation Between Small Cap and Walden Smid
Can any of the company-specific risk be diversified away by investing in both Small Cap and Walden Smid 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 Walden Smid 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 Walden Smid Cap, you can compare the effects of market volatilities on Small Cap and Walden Smid 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 Walden Smid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Walden Smid.
Diversification Opportunities for Small Cap and Walden Smid
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Walden is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Walden Smid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden Smid Cap 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 Walden Smid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Smid Cap has no effect on the direction of Small Cap i.e., Small Cap and Walden Smid go up and down completely randomly.
Pair Corralation between Small Cap and Walden Smid
Assuming the 90 days horizon Small Cap is expected to generate 1.13 times less return on investment than Walden Smid. In addition to that, Small Cap is 1.51 times more volatile than Walden Smid Cap. It trades about 0.09 of its total potential returns per unit of risk. Walden Smid Cap is currently generating about 0.15 per unit of volatility. If you would invest 2,288 in Walden Smid Cap on August 28, 2024 and sell it today you would earn a total of 429.00 from holding Walden Smid Cap or generate 18.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Small Cap Core vs. Walden Smid Cap
Performance |
| Timeline |
| Small Cap Core |
| Walden Smid Cap |
Small Cap and Walden Smid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Walden Smid
The main advantage of trading using opposite Small Cap and Walden Smid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Walden Smid 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 Walden Smid will offset losses from the drop in Walden Smid's long position.| Small Cap vs. The National Tax Free | Small Cap vs. Ishares Municipal Bond | Small Cap vs. Franklin High Yield | Small Cap vs. Gamco Global Telecommunications |
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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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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