Correlation Between Small Cap and Rm Greyhawk

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

By analyzing existing cross correlation between Small Cap Dividend and Rm Greyhawk Fund, you can compare the effects of market volatilities on Small Cap and Rm Greyhawk 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 Rm Greyhawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Rm Greyhawk.

Diversification Opportunities for Small Cap and Rm Greyhawk

0.66

Correlation Coefficient

Small Cap  Rm Greyhawk

Poor diversification

The 3 months correlation between Small and HAWKX is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Dividend and Rm Greyhawk Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rm Greyhawk Fund 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 Dividend are associated (or correlated) with Rm Greyhawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rm Greyhawk Fund has no effect on the direction of Small Cap i.e., Small Cap and Rm Greyhawk go up and down completely randomly.

Pair Corralation between Small Cap and Rm Greyhawk

Assuming the 90 days horizon Small Cap Dividend is expected to generate 2.35 times more return on investment than Rm Greyhawk. However, Small Cap is 2.35 times more volatile than Rm Greyhawk Fund. It trades about 0.03 of its potential returns per unit of risk. Rm Greyhawk Fund is currently generating about 0.03 per unit of risk. If you would invest  925.00  in Small Cap Dividend on September 28, 2024 and sell it today you would earn a total of  158.00  from holding Small Cap Dividend or generate 17.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Small Cap Dividend  vs.  Rm Greyhawk Fund

Small Cap Dividend

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Dividend are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rm Greyhawk Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rm Greyhawk Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, Rm Greyhawk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Rm Greyhawk

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

The idea behind Small Cap Dividend and Rm Greyhawk Fund 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.