Correlation Between Stone Ridge and Small Pany
Can any of the company-specific risk be diversified away by investing in both Stone Ridge and Small Pany 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 Stone Ridge and Small Pany into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Stone Ridge Diversified and Small Pany Growth, you can compare the effects of market volatilities on Stone Ridge and Small Pany 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 Stone Ridge with a short position of Small Pany. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stone Ridge and Small Pany.
Diversification Opportunities for Stone Ridge and Small Pany
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Stone and Small is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Stone Ridge Diversified and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Stone Ridge 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 Stone Ridge Diversified are associated (or correlated) with Small Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Stone Ridge i.e., Stone Ridge and Small Pany go up and down completely randomly.
Pair Corralation between Stone Ridge and Small Pany
Assuming the 90 days horizon Stone Ridge is expected to generate 6.53 times less return on investment than Small Pany. But when comparing it to its historical volatility, Stone Ridge Diversified is 8.37 times less risky than Small Pany. It trades about 0.22 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,109 in Small Pany Growth on September 1, 2024 and sell it today you would earn a total of 533.00 from holding Small Pany Growth or generate 48.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Stone Ridge Diversified vs. Small Pany Growth
Performance |
| Timeline |
| Stone Ridge Diversified |
| Small Pany Growth |
Stone Ridge and Small Pany Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Stone Ridge and Small Pany
The main advantage of trading using opposite Stone Ridge and Small Pany positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stone Ridge position performs unexpectedly, Small Pany 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 Pany will offset losses from the drop in Small Pany's long position.| Stone Ridge vs. Strategic Allocation Aggressive | Stone Ridge vs. Ab High Income | Stone Ridge vs. Western Asset High | Stone Ridge vs. T Rowe Price |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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