Correlation Between Small Capitalization and Frost Kempner
Can any of the company-specific risk be diversified away by investing in both Small Capitalization and Frost Kempner 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 Capitalization and Frost Kempner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Capitalization Portfolio and Frost Kempner Multi Cap, you can compare the effects of market volatilities on Small Capitalization and Frost Kempner 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 Capitalization with a short position of Frost Kempner. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Capitalization and Frost Kempner.
Diversification Opportunities for Small Capitalization and Frost Kempner
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Frost is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Small Capitalization Portfolio and Frost Kempner Multi Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Kempner Multi and Small Capitalization 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 Capitalization Portfolio are associated (or correlated) with Frost Kempner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Kempner Multi has no effect on the direction of Small Capitalization i.e., Small Capitalization and Frost Kempner go up and down completely randomly.
Pair Corralation between Small Capitalization and Frost Kempner
Assuming the 90 days horizon Small Capitalization Portfolio is expected to generate 2.33 times more return on investment than Frost Kempner. However, Small Capitalization is 2.33 times more volatile than Frost Kempner Multi Cap. It trades about 0.26 of its potential returns per unit of risk. Frost Kempner Multi Cap is currently generating about 0.24 per unit of risk. If you would invest 111.00 in Small Capitalization Portfolio on September 4, 2024 and sell it today you would earn a total of 10.00 from holding Small Capitalization Portfolio or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Small Capitalization Portfolio vs. Frost Kempner Multi Cap
Performance |
| Timeline |
| Small Capitalization |
| Frost Kempner Multi |
Small Capitalization and Frost Kempner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Capitalization and Frost Kempner
The main advantage of trading using opposite Small Capitalization and Frost Kempner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Capitalization position performs unexpectedly, Frost Kempner 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 Frost Kempner will offset losses from the drop in Frost Kempner's long position.| Small Capitalization vs. Siit Large Cap | Small Capitalization vs. Tax Managed Large Cap | Small Capitalization vs. Vanguard Windsor Fund | Small Capitalization vs. Qs Large Cap |
| Frost Kempner vs. Frost Kempner Multi Cap | Frost Kempner vs. Brokerage And Investment | Frost Kempner vs. Nationwide Mid Cap | Frost Kempner vs. Angel Oak Ultrashort |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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