Correlation Between Cboe Vest and Small Cap

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

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

Diversification Opportunities for Cboe Vest and Small Cap

0.71

Correlation Coefficient

Cboe Vest  Small Cap

Poor diversification

The 3 months correlation between Cboe and Small is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Cboe Vest Sp and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Cboe Vest 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 Cboe Vest Sp 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 Value has no effect on the direction of Cboe Vest i.e., Cboe Vest and Small Cap go up and down completely randomly.

Pair Corralation between Cboe Vest and Small Cap

Assuming the 90 days horizon Cboe Vest Sp is expected to generate 0.48 times more return on investment than Small Cap. However, Cboe Vest Sp is 2.09 times less risky than Small Cap. It trades about -0.51 of its potential returns per unit of risk. Small Cap Value is currently generating about -0.38 per unit of risk. If you would invest  1,296  in Cboe Vest Sp on October 5, 2024 and sell it today you would lose (116.00) from holding Cboe Vest Sp or give up 8.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Cboe Vest Sp  vs.  Small Cap Value

Cboe Vest Sp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cboe Vest Sp 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.

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward 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 Cboe Vest and Small Cap

The main advantage of trading using opposite Cboe Vest and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cboe Vest 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 Cboe Vest Sp and Small Cap Value 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.