Correlation Between Small Cap and Nt International

Can any of the company-specific risk be diversified away by investing in both Small Cap and Nt International 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 Nt International 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 Nt International Small Mid, you can compare the effects of market volatilities on Small Cap and Nt International 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 Nt International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Nt International.

Diversification Opportunities for Small Cap and Nt International

0.45

Correlation Coefficient

Small Cap  Nt International

Very weak diversification

The 3 months correlation between Small and ANTMX is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Nt International Small Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nt International Small 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 Nt International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nt International Small has no effect on the direction of Small Cap i.e., Small Cap and Nt International go up and down completely randomly.

Pair Corralation between Small Cap and Nt International

Assuming the 90 days horizon Small Cap Growth is expected to under-perform the Nt International. In addition to that, Small Cap is 1.27 times more volatile than Nt International Small Mid. It trades about -0.06 of its total potential returns per unit of risk. Nt International Small Mid is currently generating about 0.03 per unit of volatility. If you would invest  964.00  in Nt International Small Mid on December 29, 2024 and sell it today you would earn a total of  15.00  from holding Nt International Small Mid or generate 1.56% return on investment over 90 days.

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

Small Cap Growth  vs.  Nt International Small Mid

Small Cap Growth

Risk-Adjusted Performance

Very Weak

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

Nt International Small

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nt International Small Mid are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Nt International 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 Nt International

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

The idea behind Small Cap Growth and Nt International Small Mid 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.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.