Correlation Between Small Cap and Target Managed
Can any of the company-specific risk be diversified away by investing in both Small Cap and Target Managed 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 and Target Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Target Managed Allocation, you can compare the effects of market volatilities on Small Cap and Target Managed 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 with a short position of Target Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Target Managed.
Diversification Opportunities for Small Cap and Target Managed
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Target is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Target Managed Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Managed Allocation and Small 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 Small Cap Stock are associated (or correlated) with Target Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Managed Allocation has no effect on the direction of Small Cap i.e., Small Cap and Target Managed go up and down completely randomly.
Pair Corralation between Small Cap and Target Managed
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.85 times more return on investment than Target Managed. However, Small Cap is 1.85 times more volatile than Target Managed Allocation. It trades about 0.13 of its potential returns per unit of risk. Target Managed Allocation is currently generating about 0.12 per unit of risk. If you would invest 1,418 in Small Cap Stock on September 2, 2024 and sell it today you would earn a total of 145.00 from holding Small Cap Stock or generate 10.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Target Managed Allocation
Performance |
| Timeline |
| Small Cap Stock |
| Target Managed Allocation |
Small Cap and Target Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Target Managed
The main advantage of trading using opposite Small Cap and Target Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Target Managed 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 Target Managed will offset losses from the drop in Target Managed's long position.| Small Cap vs. Alliancebernstein National Municipal | Small Cap vs. Old Westbury Municipal | Small Cap vs. Ab Impact Municipal | Small Cap vs. Nuveen Arizona Municipal |
| Target Managed vs. Capital Growth Fund | Target Managed vs. Emerging Markets Fund | Target Managed vs. High Income Fund | Target Managed vs. International Fund International |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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