Correlation Between Extended Market and Buffalo Discovery
Can any of the company-specific risk be diversified away by investing in both Extended Market and Buffalo Discovery 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 Extended Market and Buffalo Discovery into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Buffalo Discovery, you can compare the effects of market volatilities on Extended Market and Buffalo Discovery 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 Extended Market with a short position of Buffalo Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Buffalo Discovery.
Diversification Opportunities for Extended Market and Buffalo Discovery
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Extended and Buffalo is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Buffalo Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Buffalo Discovery and Extended Market 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 Extended Market Index are associated (or correlated) with Buffalo Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Buffalo Discovery has no effect on the direction of Extended Market i.e., Extended Market and Buffalo Discovery go up and down completely randomly.
Pair Corralation between Extended Market and Buffalo Discovery
Assuming the 90 days horizon Extended Market Index is expected to generate 1.16 times more return on investment than Buffalo Discovery. However, Extended Market is 1.16 times more volatile than Buffalo Discovery. It trades about 0.27 of its potential returns per unit of risk. Buffalo Discovery is currently generating about 0.2 per unit of risk. If you would invest 2,325 in Extended Market Index on August 30, 2024 and sell it today you would earn a total of 188.00 from holding Extended Market Index or generate 8.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Buffalo Discovery
Performance |
| Timeline |
| Extended Market Index |
| Buffalo Discovery |
Extended Market and Buffalo Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Buffalo Discovery
The main advantage of trading using opposite Extended Market and Buffalo Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Buffalo Discovery 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 Buffalo Discovery will offset losses from the drop in Buffalo Discovery's long position.| Extended Market vs. Queens Road Small | Extended Market vs. Boston Partners Small | Extended Market vs. Hennessy Nerstone Mid | Extended Market vs. Lord Abbett Small |
| Buffalo Discovery vs. Pace Large Growth | Buffalo Discovery vs. Dodge Cox Stock | Buffalo Discovery vs. Strategic Allocation Aggressive | Buffalo Discovery vs. Touchstone Large Cap |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |