Correlation Between Small Company and Short Duration
Can any of the company-specific risk be diversified away by investing in both Small Company and Short Duration 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 Small Company and Short Duration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Pany Growth and Short Duration Inflation, you can compare the effects of market volatilities on Small Company and Short Duration 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 Small Company with a short position of Short Duration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Short Duration.
Diversification Opportunities for Small Company and Short Duration
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Short is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Short Duration Inflation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Duration Inflation and Small Company 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 Small Pany Growth are associated (or correlated) with Short Duration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Duration Inflation has no effect on the direction of Small Company i.e., Small Company and Short Duration go up and down completely randomly.
Pair Corralation between Small Company and Short Duration
Assuming the 90 days horizon Small Pany Growth is expected to generate 10.84 times more return on investment than Short Duration. However, Small Company is 10.84 times more volatile than Short Duration Inflation. It trades about 0.06 of its potential returns per unit of risk. Short Duration Inflation is currently generating about 0.09 per unit of risk. If you would invest 898.00 in Small Pany Growth on December 7, 2024 and sell it today you would earn a total of 528.00 from holding Small Pany Growth or generate 58.8% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Small Pany Growth vs. Short Duration Inflation
Performance |
Timeline |
Small Pany Growth |
Short Duration Inflation |
Small Company and Short Duration Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Company and Short Duration
The main advantage of trading using opposite Small Company and Short Duration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Company position performs unexpectedly, Short Duration 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 Short Duration will offset losses from the drop in Short Duration's long position.Small Company vs. Mid Cap Growth | Small Company vs. Growth Portfolio Class | Small Company vs. Morgan Stanley Multi | Small Company vs. Emerging Markets Portfolio |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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