Correlation Between Ultrasmall Cap and Salient Tactical
Can any of the company-specific risk be diversified away by investing in both Ultrasmall Cap and Salient Tactical 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 Ultrasmall Cap and Salient Tactical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ultrasmall Cap Profund Ultrasmall Cap and Salient Tactical Plus, you can compare the effects of market volatilities on Ultrasmall Cap and Salient Tactical 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 Ultrasmall Cap with a short position of Salient Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrasmall Cap and Salient Tactical.
Diversification Opportunities for Ultrasmall Cap and Salient Tactical
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ultrasmall and Salient is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ultrasmall Cap Profund Ultrasm and Salient Tactical Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salient Tactical Plus and Ultrasmall Cap 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 Ultrasmall Cap Profund Ultrasmall Cap are associated (or correlated) with Salient Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salient Tactical Plus has no effect on the direction of Ultrasmall Cap i.e., Ultrasmall Cap and Salient Tactical go up and down completely randomly.
Pair Corralation between Ultrasmall Cap and Salient Tactical
Assuming the 90 days horizon Ultrasmall Cap Profund Ultrasmall Cap is expected to generate 6.1 times more return on investment than Salient Tactical. However, Ultrasmall Cap is 6.1 times more volatile than Salient Tactical Plus. It trades about 0.07 of its potential returns per unit of risk. Salient Tactical Plus is currently generating about 0.05 per unit of risk. If you would invest 6,160 in Ultrasmall Cap Profund Ultrasmall Cap on September 1, 2024 and sell it today you would earn a total of 1,891 from holding Ultrasmall Cap Profund Ultrasmall Cap or generate 30.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.47% |
| Values | Daily Returns |
Ultrasmall Cap Profund Ultrasm vs. Salient Tactical Plus
Performance |
| Timeline |
| Ultrasmall Cap Profund |
| Salient Tactical Plus |
Ultrasmall Cap and Salient Tactical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ultrasmall Cap and Salient Tactical
The main advantage of trading using opposite Ultrasmall Cap and Salient Tactical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ultrasmall Cap position performs unexpectedly, Salient Tactical 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 Salient Tactical will offset losses from the drop in Salient Tactical's long position.The idea behind Ultrasmall Cap Profund Ultrasmall Cap and Salient Tactical Plus pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Salient Tactical vs. Salient Tactical Plus | Salient Tactical vs. Salient Tactical Growth | Salient Tactical vs. Salient Tactical Growth | Salient Tactical vs. Salient Tactical Growth |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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