Correlation Between Small-cap Value and Short Oil
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Short Oil 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-cap Value and Short Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Profund and Short Oil Gas, you can compare the effects of market volatilities on Small-cap Value and Short Oil 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-cap Value with a short position of Short Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Short Oil.
Diversification Opportunities for Small-cap Value and Short Oil
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Small-cap and Short is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas and Small-cap Value 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 Cap Value Profund are associated (or correlated) with Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of Small-cap Value i.e., Small-cap Value and Short Oil go up and down completely randomly.
Pair Corralation between Small-cap Value and Short Oil
Assuming the 90 days horizon Small Cap Value Profund is expected to generate 1.02 times more return on investment than Short Oil. However, Small-cap Value is 1.02 times more volatile than Short Oil Gas. It trades about 0.04 of its potential returns per unit of risk. Short Oil Gas is currently generating about -0.02 per unit of risk. If you would invest 9,583 in Small Cap Value Profund on August 30, 2024 and sell it today you would earn a total of 2,341 from holding Small Cap Value Profund or generate 24.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Profund vs. Short Oil Gas
Performance |
| Timeline |
| Small Cap Value |
| Short Oil Gas |
Small-cap Value and Short Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Short Oil
The main advantage of trading using opposite Small-cap Value and Short Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Short Oil 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 Short Oil will offset losses from the drop in Short Oil's long position.| Small-cap Value vs. Short Real Estate | Small-cap Value vs. Real Estate Ultrasector | Small-cap Value vs. Real Estate Ultrasector | Small-cap Value vs. Short Real Estate |
| Short Oil vs. Short Real Estate | Short Oil vs. Short Real Estate | Short Oil vs. Ultrashort Mid Cap Profund | Short Oil vs. Ultrashort Mid Cap Profund |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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