Correlation Between Vela Large and Vela Small
Can any of the company-specific risk be diversified away by investing in both Vela Large and Vela 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 Vela Large and Vela Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vela Large Cap and Vela Small Cap, you can compare the effects of market volatilities on Vela Large and Vela 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 Vela Large with a short position of Vela Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vela Large and Vela Small.
Diversification Opportunities for Vela Large and Vela Small
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vela and Vela is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vela Large Cap and Vela Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vela Small Cap and Vela Large 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 Vela Large Cap are associated (or correlated) with Vela Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vela Small Cap has no effect on the direction of Vela Large i.e., Vela Large and Vela Small go up and down completely randomly.
Pair Corralation between Vela Large and Vela Small
Assuming the 90 days horizon Vela Large Cap is expected to generate 0.62 times more return on investment than Vela Small. However, Vela Large Cap is 1.62 times less risky than Vela Small. It trades about 0.13 of its potential returns per unit of risk. Vela Small Cap is currently generating about 0.08 per unit of risk. If you would invest 1,400 in Vela Large Cap on August 31, 2024 and sell it today you would earn a total of 415.00 from holding Vela Large Cap or generate 29.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vela Large Cap vs. Vela Small Cap
Performance |
| Timeline |
| Vela Large Cap |
| Vela Small Cap |
Vela Large and Vela Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vela Large and Vela Small
The main advantage of trading using opposite Vela Large and Vela Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vela Large position performs unexpectedly, Vela 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 Vela Small will offset losses from the drop in Vela Small's long position.| Vela Large vs. Champlain Mid Cap | Vela Large vs. Kinetics Small Cap | Vela Large vs. Tfa Alphagen Growth | Vela Large vs. Artisan Small Cap |
| Vela Small vs. Gamco Natural Resources | Vela Small vs. Fidelity Advisor Energy | Vela Small vs. Energy Basic Materials | Vela Small vs. Firsthand Alternative Energy |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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