Correlation Between Firsthand Alternative and Small Cap

Can any of the company-specific risk be diversified away by investing in both Firsthand Alternative and Small Cap 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 Firsthand Alternative and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Firsthand Alternative Energy and Small Cap Equity, you can compare the effects of market volatilities on Firsthand Alternative and Small Cap 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 Firsthand Alternative with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firsthand Alternative and Small Cap.

Diversification Opportunities for Firsthand Alternative and Small Cap

-0.28

Correlation Coefficient

Firsthand Alternative  Small Cap

Very good diversification

The 3 months correlation between Firsthand and Small is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Firsthand Alternative Energy and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Firsthand Alternative 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 Firsthand Alternative Energy are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Equity has no effect on the direction of Firsthand Alternative i.e., Firsthand Alternative and Small Cap go up and down completely randomly.

Pair Corralation between Firsthand Alternative and Small Cap

Assuming the 90 days horizon Firsthand Alternative is expected to generate 11.49 times less return on investment than Small Cap. In addition to that, Firsthand Alternative is 1.07 times more volatile than Small Cap Equity. It trades about 0.01 of its total potential returns per unit of risk. Small Cap Equity is currently generating about 0.09 per unit of volatility. If you would invest  1,779  in Small Cap Equity on September 12, 2024 and sell it today you would earn a total of  128.00  from holding Small Cap Equity or generate 7.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Firsthand Alternative Energy  vs.  Small Cap Equity

Firsthand Alternative

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Firsthand Alternative Energy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Firsthand Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Equity

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Equity are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Firsthand Alternative and Small Cap

The main advantage of trading using opposite Firsthand Alternative and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firsthand Alternative position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.

The idea behind Firsthand Alternative Energy and Small Cap Equity pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.