Correlation Between James Balanced and Perritt Microcap

Can any of the company-specific risk be diversified away by investing in both James Balanced and Perritt Microcap 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 James Balanced and Perritt Microcap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between James Balanced Golden and Perritt Microcap Opportunities, you can compare the effects of market volatilities on James Balanced and Perritt Microcap 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 James Balanced with a short position of Perritt Microcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of James Balanced and Perritt Microcap.

Diversification Opportunities for James Balanced and Perritt Microcap

0.63

Correlation Coefficient

James Balanced  Perritt Microcap

Poor diversification

The 3 months correlation between James and Perritt is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding James Balanced Golden and Perritt Microcap Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perritt Microcap Opp and James Balanced 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 James Balanced Golden are associated (or correlated) with Perritt Microcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perritt Microcap Opp has no effect on the direction of James Balanced i.e., James Balanced and Perritt Microcap go up and down completely randomly.

Pair Corralation between James Balanced and Perritt Microcap

Assuming the 90 days horizon James Balanced is expected to generate 1.93 times less return on investment than Perritt Microcap. But when comparing it to its historical volatility, James Balanced Golden is 2.06 times less risky than Perritt Microcap. It trades about 0.12 of its potential returns per unit of risk. Perritt Microcap Opportunities is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2,432  in Perritt Microcap Opportunities on October 25, 2024 and sell it today you would earn a total of  51.00  from holding Perritt Microcap Opportunities or generate 2.1% return on investment over 90 days.

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

James Balanced Golden  vs.  Perritt Microcap Opportunities

James Balanced Golden

Risk-Adjusted Performance

0 of 100

Very Weak

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

Perritt Microcap Opp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Perritt Microcap Opportunities are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Perritt Microcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with James Balanced and Perritt Microcap

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

The idea behind James Balanced Golden and Perritt Microcap Opportunities 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.

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 Stocks Directory module to find actively traded stocks across global markets.