Correlation Between Steward Select and Small Cap
Can any of the company-specific risk be diversified away by investing in both Steward Select and Small Cap 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 Steward Select and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steward Select Bond and Small Cap Stock, you can compare the effects of market volatilities on Steward Select and Small Cap 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 Steward Select with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steward Select and Small Cap.
Diversification Opportunities for Steward Select and Small Cap
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Steward and Small is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Steward Select Bond and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Steward Select 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 Steward Select Bond are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Stock has no effect on the direction of Steward Select i.e., Steward Select and Small Cap go up and down completely randomly.
Pair Corralation between Steward Select and Small Cap
Assuming the 90 days horizon Steward Select is expected to generate 3.33 times less return on investment than Small Cap. But when comparing it to its historical volatility, Steward Select Bond is 5.08 times less risky than Small Cap. It trades about 0.04 of its potential returns per unit of risk. Small Cap Stock is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,275 in Small Cap Stock on November 3, 2024 and sell it today you would earn a total of 94.00 from holding Small Cap Stock or generate 7.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Steward Select Bond vs. Small Cap Stock
Performance |
| Timeline |
| Steward Select Bond |
| Small Cap Stock |
Steward Select and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steward Select and Small Cap
The main advantage of trading using opposite Steward Select and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steward Select position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Steward Select vs. Ishares Municipal Bond | Steward Select vs. Transamerica Intermediate Muni | Steward Select vs. Goldman Sachs Short | Steward Select vs. Oklahoma Municipal Fund |
| Small Cap vs. Lgm Risk Managed | Small Cap vs. Artisan High Income | Small Cap vs. Catalyst Exceed Defined | Small Cap vs. Ironclad Managed Risk |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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