Correlation Between Bats Series and Small Cap
Can any of the company-specific risk be diversified away by investing in both Bats Series 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 Bats Series and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bats Series M and Small Cap Stock, you can compare the effects of market volatilities on Bats Series 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 Bats Series with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bats Series and Small Cap.
Diversification Opportunities for Bats Series and Small Cap
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bats and Small is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bats Series M and Small Cap Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Stock and Bats Series 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 Bats Series M 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 Stock has no effect on the direction of Bats Series i.e., Bats Series and Small Cap go up and down completely randomly.
Pair Corralation between Bats Series and Small Cap
Assuming the 90 days horizon Bats Series M is expected to generate 0.29 times more return on investment than Small Cap. However, Bats Series M is 3.45 times less risky than Small Cap. It trades about 0.12 of its potential returns per unit of risk. Small Cap Stock is currently generating about -0.1 per unit of risk. If you would invest 815.00 in Bats Series M on December 28, 2024 and sell it today you would earn a total of 19.00 from holding Bats Series M or generate 2.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Bats Series M vs. Small Cap Stock
Performance |
Timeline |
Bats Series M |
Small Cap Stock |
Bats Series and Small Cap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bats Series and Small Cap
The main advantage of trading using opposite Bats Series and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bats Series 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.Bats Series vs. Aqr Long Short Equity | Bats Series vs. Pace International Equity | Bats Series vs. Pnc International Equity | Bats Series vs. Aqr Equity Market |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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