Correlation Between Small Cap and Conquer Risk

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

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

Diversification Opportunities for Small Cap and Conquer Risk

0.78

Correlation Coefficient

Small Cap  Conquer Risk

Poor diversification

The 3 months correlation between Small and Conquer is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Conquer Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conquer Risk Managed 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 Value are associated (or correlated) with Conquer Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conquer Risk Managed has no effect on the direction of Small Cap i.e., Small Cap and Conquer Risk go up and down completely randomly.

Pair Corralation between Small Cap and Conquer Risk

Assuming the 90 days horizon Small Cap Value is expected to generate 4.82 times more return on investment than Conquer Risk. However, Small Cap is 4.82 times more volatile than Conquer Risk Managed. It trades about 0.03 of its potential returns per unit of risk. Conquer Risk Managed is currently generating about 0.0 per unit of risk. If you would invest  981.00  in Small Cap Value on October 9, 2024 and sell it today you would earn a total of  63.00  from holding Small Cap Value or generate 6.42% return on investment over 90 days.

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

Small Cap Value  vs.  Conquer Risk Managed

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

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

Conquer Risk Managed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conquer Risk Managed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Conquer Risk 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 Conquer Risk

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

The idea behind Small Cap Value and Conquer Risk Managed 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.