Correlation Between Small Cap and Western Acquisition
Can any of the company-specific risk be diversified away by investing in both Small Cap and Western Acquisition 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 Western Acquisition 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 Western Acquisition Ventures, you can compare the effects of market volatilities on Small Cap and Western Acquisition 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 Western Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Western Acquisition.
Diversification Opportunities for Small Cap and Western Acquisition
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Small and Western is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Small Cap i.e., Small Cap and Western Acquisition go up and down completely randomly.
Pair Corralation between Small Cap and Western Acquisition
Assuming the 90 days horizon Small Cap Core is expected to generate 0.91 times more return on investment than Western Acquisition. However, Small Cap Core is 1.1 times less risky than Western Acquisition. It trades about 0.09 of its potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.02 per unit of risk. If you would invest 1,131 in Small Cap Core on August 26, 2024 and sell it today you would earn a total of 355.00 from holding Small Cap Core or generate 31.39% 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. Western Acquisition Ventures
Performance |
| Timeline |
| Small Cap Core |
| Western Acquisition |
Small Cap and Western Acquisition Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Western Acquisition
The main advantage of trading using opposite Small Cap and Western Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Western Acquisition 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 Western Acquisition will offset losses from the drop in Western Acquisition'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 |
| Western Acquisition vs. PowerUp Acquisition Corp | Western Acquisition vs. Aurora Innovation | Western Acquisition vs. HUMANA INC | Western Acquisition vs. Aquagold International |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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