Correlation Between Strategic Advisers and Small-company Stock

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

By analyzing existing cross correlation between Strategic Advisers Income and Small Company Stock Fund, you can compare the effects of market volatilities on Strategic Advisers and Small-company Stock 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 Strategic Advisers with a short position of Small-company Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Advisers and Small-company Stock.

Diversification Opportunities for Strategic Advisers and Small-company Stock

-0.16

Correlation Coefficient

Strategic Advisers  Small-company Stock

Good diversification

The 3 months correlation between Strategic and Small-company is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Advisers Income and Small Company Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small-company Stock and Strategic Advisers 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 Strategic Advisers Income are associated (or correlated) with Small-company Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small-company Stock has no effect on the direction of Strategic Advisers i.e., Strategic Advisers and Small-company Stock go up and down completely randomly.

Pair Corralation between Strategic Advisers and Small-company Stock

Assuming the 90 days horizon Strategic Advisers Income is expected to generate 0.2 times more return on investment than Small-company Stock. However, Strategic Advisers Income is 4.9 times less risky than Small-company Stock. It trades about 0.12 of its potential returns per unit of risk. Small Company Stock Fund is currently generating about -0.16 per unit of risk. If you would invest  861.00  in Strategic Advisers Income on December 21, 2024 and sell it today you would earn a total of  14.00  from holding Strategic Advisers Income or generate 1.63% return on investment over 90 days.

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

Strategic Advisers Income  vs.  Small Company Stock Fund

Strategic Advisers Income

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Advisers Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Strategic Advisers is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small-company Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Company Stock Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Strategic Advisers and Small-company Stock

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

The idea behind Strategic Advisers Income and Small Company Stock Fund 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.