Correlation Between Small Cap and Matson Money
Can any of the company-specific risk be diversified away by investing in both Small Cap and Matson Money 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 Matson Money into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth and Matson Money Equity, you can compare the effects of market volatilities on Small Cap and Matson Money 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 Matson Money. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Matson Money.
Diversification Opportunities for Small Cap and Matson Money
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and Matson is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Matson Money Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matson Money Equity 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 Growth are associated (or correlated) with Matson Money. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matson Money Equity has no effect on the direction of Small Cap i.e., Small Cap and Matson Money go up and down completely randomly.
Pair Corralation between Small Cap and Matson Money
Assuming the 90 days horizon Small Cap Growth is expected to under-perform the Matson Money. In addition to that, Small Cap is 1.38 times more volatile than Matson Money Equity. It trades about -0.07 of its total potential returns per unit of risk. Matson Money Equity is currently generating about -0.05 per unit of volatility. If you would invest 3,173 in Matson Money Equity on December 28, 2024 and sell it today you would lose (93.00) from holding Matson Money Equity or give up 2.93% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.36% |
Values | Daily Returns |
Small Cap Growth vs. Matson Money Equity
Performance |
Timeline |
Small Cap Growth |
Matson Money Equity |
Small Cap and Matson Money Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and Matson Money
The main advantage of trading using opposite Small Cap and Matson Money positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Matson Money 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 Matson Money will offset losses from the drop in Matson Money's long position.Small Cap vs. Mid Cap Value | Small Cap vs. Equity Growth Fund | Small Cap vs. Income Growth Fund | Small Cap vs. Emerging Markets Fund |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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