Correlation Between Firsthand Technology and Smallcap
Can any of the company-specific risk be diversified away by investing in both Firsthand Technology and Smallcap 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 Firsthand Technology and Smallcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Firsthand Technology Opportunities and Smallcap Sp 600, you can compare the effects of market volatilities on Firsthand Technology and Smallcap 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 Firsthand Technology with a short position of Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firsthand Technology and Smallcap.
Diversification Opportunities for Firsthand Technology and Smallcap
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FIRSTHAND and Smallcap is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Firsthand Technology Opportuni and Smallcap Sp 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Sp 600 and Firsthand Technology 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 Firsthand Technology Opportunities are associated (or correlated) with Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Sp 600 has no effect on the direction of Firsthand Technology i.e., Firsthand Technology and Smallcap go up and down completely randomly.
Pair Corralation between Firsthand Technology and Smallcap
Assuming the 90 days horizon Firsthand Technology is expected to generate 1.06 times less return on investment than Smallcap. But when comparing it to its historical volatility, Firsthand Technology Opportunities is 1.14 times less risky than Smallcap. It trades about 0.31 of its potential returns per unit of risk. Smallcap Sp 600 is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,887 in Smallcap Sp 600 on September 2, 2024 and sell it today you would earn a total of 269.00 from holding Smallcap Sp 600 or generate 9.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.71% |
| Values | Daily Returns |
Firsthand Technology Opportuni vs. Smallcap Sp 600
Performance |
| Timeline |
| Firsthand Technology |
| Smallcap Sp 600 |
Firsthand Technology and Smallcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Firsthand Technology and Smallcap
The main advantage of trading using opposite Firsthand Technology and Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firsthand Technology position performs unexpectedly, Smallcap 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 Smallcap will offset losses from the drop in Smallcap's long position.| Firsthand Technology vs. Berkshire Focus | Firsthand Technology vs. Red Oak Technology | Firsthand Technology vs. Jacob Internet Fund | Firsthand Technology vs. Kinetics Internet Fund |
| Smallcap vs. The Gabelli Healthcare | Smallcap vs. Lord Abbett Health | Smallcap vs. Prudential Health Sciences | Smallcap vs. Baron Health Care |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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