Correlation Between Contango ORE and Small Cap

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

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

Diversification Opportunities for Contango ORE and Small Cap

-0.42

Correlation Coefficient

Contango ORE  Small Cap

Very good diversification

The 3 months correlation between Contango and Small is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Contango ORE and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium and Contango ORE 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 Contango ORE 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 Premium has no effect on the direction of Contango ORE i.e., Contango ORE and Small Cap go up and down completely randomly.

Pair Corralation between Contango ORE and Small Cap

Given the investment horizon of 90 days Contango ORE is expected to under-perform the Small Cap. In addition to that, Contango ORE is 11.75 times more volatile than Small Cap Premium. It trades about 0.0 of its total potential returns per unit of risk. Small Cap Premium is currently generating about 0.06 per unit of volatility. If you would invest  2,428  in Small Cap Premium on December 20, 2024 and sell it today you would earn a total of  27.00  from holding Small Cap Premium or generate 1.11% return on investment over 90 days.

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

Contango ORE  vs.  Small Cap Premium

Contango ORE

Risk-Adjusted Performance

Weak

Over the last 90 days Contango ORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Contango ORE is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Small Cap Premium

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Contango ORE and Small Cap

The main advantage of trading using opposite Contango ORE and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Contango ORE 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 Contango ORE and Small Cap Premium 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.