Correlation Between Snap and The Midcap
Can any of the company-specific risk be diversified away by investing in both Snap and The Midcap 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 Snap and The Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and The Midcap Growth, you can compare the effects of market volatilities on Snap and The Midcap 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 Snap with a short position of The Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and The Midcap.
Diversification Opportunities for Snap and The Midcap
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and The is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and The Midcap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Snap 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 Snap Inc are associated (or correlated) with The Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Snap i.e., Snap and The Midcap go up and down completely randomly.
Pair Corralation between Snap and The Midcap
Given the investment horizon of 90 days Snap Inc is expected to generate 4.2 times more return on investment than The Midcap. However, Snap is 4.2 times more volatile than The Midcap Growth. It trades about 0.08 of its potential returns per unit of risk. The Midcap Growth is currently generating about 0.25 per unit of risk. If you would invest 1,089 in Snap Inc on August 30, 2024 and sell it today you would earn a total of 72.00 from holding Snap Inc or generate 6.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. The Midcap Growth
Performance |
| Timeline |
| Snap Inc |
| Midcap Growth |
Snap and The Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and The Midcap
The main advantage of trading using opposite Snap and The Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, The Midcap 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 The Midcap will offset losses from the drop in The Midcap's long position.The idea behind Snap Inc and The Midcap Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| The Midcap vs. Amg River Road | The Midcap vs. Columbia Small Cap | The Midcap vs. Ab Small Cap | The Midcap vs. Ab Discovery Value |
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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