Correlation Between Atac Inflation and Small Cap

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

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

Diversification Opportunities for Atac Inflation and Small Cap

0.87

Correlation Coefficient

Atac Inflation  Small Cap

Very poor diversification

The 3 months correlation between Atac and Small is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Atac Inflation Rotation and Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Index and Atac Inflation 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 Atac Inflation Rotation 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 Index has no effect on the direction of Atac Inflation i.e., Atac Inflation and Small Cap go up and down completely randomly.

Pair Corralation between Atac Inflation and Small Cap

Assuming the 90 days horizon Atac Inflation Rotation is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Atac Inflation Rotation is 1.4 times less risky than Small Cap. The mutual fund trades about -0.4 of its potential returns per unit of risk. The Small Cap Index is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest  1,753  in Small Cap Index on October 11, 2024 and sell it today you would lose (104.00) from holding Small Cap Index or give up 5.93% of portfolio value over 90 days.

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

Atac Inflation Rotation  vs.  Small Cap Index

Atac Inflation Rotation

Risk-Adjusted Performance

0 of 100

Very Weak

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

Small Cap Index

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Atac Inflation and Small Cap

The main advantage of trading using opposite Atac Inflation and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atac Inflation 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 Atac Inflation Rotation and Small Cap Index 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.