Correlation Between Small Cap and Ab Sustainable
Can any of the company-specific risk be diversified away by investing in both Small Cap and Ab Sustainable 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 Ab Sustainable 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 Ab Sustainable Thematic, you can compare the effects of market volatilities on Small Cap and Ab Sustainable 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 Ab Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Ab Sustainable.
Diversification Opportunities for Small Cap and Ab Sustainable
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and STHYX is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Ab Sustainable Thematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Sustainable Thematic 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 Ab Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Sustainable Thematic has no effect on the direction of Small Cap i.e., Small Cap and Ab Sustainable go up and down completely randomly.
Pair Corralation between Small Cap and Ab Sustainable
Assuming the 90 days horizon Small Cap Core is expected to generate 4.76 times more return on investment than Ab Sustainable. However, Small Cap is 4.76 times more volatile than Ab Sustainable Thematic. It trades about 0.13 of its potential returns per unit of risk. Ab Sustainable Thematic is currently generating about -0.06 per unit of risk. If you would invest 1,373 in Small Cap Core on August 24, 2024 and sell it today you would earn a total of 64.00 from holding Small Cap Core or generate 4.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Ab Sustainable Thematic
Performance |
| Timeline |
| Small Cap Core |
| Ab Sustainable Thematic |
Small Cap and Ab Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Ab Sustainable
The main advantage of trading using opposite Small Cap and Ab Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Ab Sustainable 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 Ab Sustainable will offset losses from the drop in Ab Sustainable's 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 |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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