Correlation Between Sound Shore and Fam Small
Can any of the company-specific risk be diversified away by investing in both Sound Shore and Fam Small 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 Sound Shore and Fam Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Shore Fund and Fam Small Cap, you can compare the effects of market volatilities on Sound Shore and Fam Small 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 Sound Shore with a short position of Fam Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Shore and Fam Small.
Diversification Opportunities for Sound Shore and Fam Small
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sound and Fam is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sound Shore Fund and Fam Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fam Small Cap and Sound Shore 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 Sound Shore Fund are associated (or correlated) with Fam Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fam Small Cap has no effect on the direction of Sound Shore i.e., Sound Shore and Fam Small go up and down completely randomly.
Pair Corralation between Sound Shore and Fam Small
Assuming the 90 days horizon Sound Shore is expected to generate 1.19 times less return on investment than Fam Small. But when comparing it to its historical volatility, Sound Shore Fund is 1.38 times less risky than Fam Small. It trades about 0.11 of its potential returns per unit of risk. Fam Small Cap is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,545 in Fam Small Cap on September 1, 2024 and sell it today you would earn a total of 488.00 from holding Fam Small Cap or generate 19.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sound Shore Fund vs. Fam Small Cap
Performance |
| Timeline |
| Sound Shore Fund |
| Fam Small Cap |
Sound Shore and Fam Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Shore and Fam Small
The main advantage of trading using opposite Sound Shore and Fam Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Shore position performs unexpectedly, Fam Small 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 Fam Small will offset losses from the drop in Fam Small's long position.| Sound Shore vs. Neuberger Berman Genesis | Sound Shore vs. T Rowe Price | Sound Shore vs. Putnam High Income | Sound Shore vs. Federated Hermes Conservative |
| Fam Small vs. Fam Equity Income Fund | Fam Small vs. Fam Value Fund | Fam Small vs. Sound Shore Fund | Fam Small vs. Consumer Services Ultrasector |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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