Correlation Between Scout Small and Optimum Small
Can any of the company-specific risk be diversified away by investing in both Scout Small and Optimum 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 Scout Small and Optimum Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scout Small Cap and Optimum Small Mid Cap, you can compare the effects of market volatilities on Scout Small and Optimum 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 Scout Small with a short position of Optimum Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scout Small and Optimum Small.
Diversification Opportunities for Scout Small and Optimum Small
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Scout and Optimum is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Scout Small Cap and Optimum Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Optimum Small Mid and Scout Small 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 Scout Small Cap are associated (or correlated) with Optimum Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Optimum Small Mid has no effect on the direction of Scout Small i.e., Scout Small and Optimum Small go up and down completely randomly.
Pair Corralation between Scout Small and Optimum Small
Assuming the 90 days horizon Scout Small Cap is expected to generate 1.22 times more return on investment than Optimum Small. However, Scout Small is 1.22 times more volatile than Optimum Small Mid Cap. It trades about 0.08 of its potential returns per unit of risk. Optimum Small Mid Cap is currently generating about 0.07 per unit of risk. If you would invest 2,495 in Scout Small Cap on September 12, 2024 and sell it today you would earn a total of 959.00 from holding Scout Small Cap or generate 38.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Scout Small Cap vs. Optimum Small Mid Cap
Performance |
| Timeline |
| Scout Small Cap |
| Optimum Small Mid |
Scout Small and Optimum Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scout Small and Optimum Small
The main advantage of trading using opposite Scout Small and Optimum Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scout Small position performs unexpectedly, Optimum 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 Optimum Small will offset losses from the drop in Optimum Small's long position.| Scout Small vs. Red Oak Technology | Scout Small vs. Biotechnology Ultrasector Profund | Scout Small vs. Icon Information Technology | Scout Small vs. Janus Global Technology |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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