Correlation Between Small Cap and Catalystmillburn
Can any of the company-specific risk be diversified away by investing in both Small Cap and Catalystmillburn 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 Catalystmillburn 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 Catalystmillburn Hedge Strategy, you can compare the effects of market volatilities on Small Cap and Catalystmillburn 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 Catalystmillburn. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Catalystmillburn.
Diversification Opportunities for Small Cap and Catalystmillburn
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Catalystmillburn is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge 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 Catalystmillburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of Small Cap i.e., Small Cap and Catalystmillburn go up and down completely randomly.
Pair Corralation between Small Cap and Catalystmillburn
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.72 times more return on investment than Catalystmillburn. However, Small Cap is 1.72 times more volatile than Catalystmillburn Hedge Strategy. It trades about 0.05 of its potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about 0.04 per unit of risk. If you would invest 1,123 in Small Cap Stock on September 14, 2024 and sell it today you would earn a total of 381.00 from holding Small Cap Stock or generate 33.93% 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. Catalystmillburn Hedge Strateg
Performance |
| Timeline |
| Small Cap Stock |
| Catalystmillburn Hedge |
Small Cap and Catalystmillburn Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Catalystmillburn
The main advantage of trading using opposite Small Cap and Catalystmillburn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Catalystmillburn 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 Catalystmillburn will offset losses from the drop in Catalystmillburn's long position.| Small Cap vs. Guggenheim Managed Futures | Small Cap vs. Simt Multi Asset Inflation | Small Cap vs. Goldman Sachs Inflation | Small Cap vs. Loomis Sayles Inflation |
| Catalystmillburn vs. T Rowe Price | Catalystmillburn vs. Fidelity Advisor Diversified | Catalystmillburn vs. Pioneer Diversified High | Catalystmillburn vs. Small Cap Stock |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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