Correlation Between Small Cap and Inverse Sp
Can any of the company-specific risk be diversified away by investing in both Small Cap and Inverse Sp 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 Inverse Sp 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 Inverse Sp 500, you can compare the effects of market volatilities on Small Cap and Inverse Sp 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 Inverse Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Inverse Sp.
Diversification Opportunities for Small Cap and Inverse Sp
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Small and Inverse is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Inverse Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Sp 500 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 Inverse Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Sp 500 has no effect on the direction of Small Cap i.e., Small Cap and Inverse Sp go up and down completely randomly.
Pair Corralation between Small Cap and Inverse Sp
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.54 times more return on investment than Inverse Sp. However, Small Cap is 1.54 times more volatile than Inverse Sp 500. It trades about 0.05 of its potential returns per unit of risk. Inverse Sp 500 is currently generating about -0.08 per unit of risk. If you would invest 1,124 in Small Cap Stock on September 12, 2024 and sell it today you would earn a total of 378.00 from holding Small Cap Stock or generate 33.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Inverse Sp 500
Performance |
| Timeline |
| Small Cap Stock |
| Inverse Sp 500 |
Small Cap and Inverse Sp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Inverse Sp
The main advantage of trading using opposite Small Cap and Inverse Sp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Inverse Sp 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 Inverse Sp will offset losses from the drop in Inverse Sp's long position.| Small Cap vs. Shelton Emerging Markets | Small Cap vs. Kinetics Market Opportunities | Small Cap vs. Siit Emerging Markets | Small Cap vs. Investec Emerging Markets |
| Inverse Sp vs. Small Cap Stock | Inverse Sp vs. Adams Diversified Equity | Inverse Sp vs. Pimco Diversified Income | Inverse Sp vs. Jhancock Diversified Macro |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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