Correlation Between Rational/pier and Small Cap

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

By analyzing existing cross correlation between Rationalpier 88 Convertible and Small Cap Growth, you can compare the effects of market volatilities on Rational/pier 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 Rational/pier with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational/pier and Small Cap.

Diversification Opportunities for Rational/pier and Small Cap

0.67

Correlation Coefficient

Rational/pier  Small Cap

Poor diversification

The 3 months correlation between Rational/pier and Small is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rationalpier 88 Convertible and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Rational/pier 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 Rationalpier 88 Convertible 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 Growth has no effect on the direction of Rational/pier i.e., Rational/pier and Small Cap go up and down completely randomly.

Pair Corralation between Rational/pier and Small Cap

Assuming the 90 days horizon Rationalpier 88 Convertible is expected to generate 0.43 times more return on investment than Small Cap. However, Rationalpier 88 Convertible is 2.35 times less risky than Small Cap. It trades about -0.05 of its potential returns per unit of risk. Small Cap Growth is currently generating about -0.16 per unit of risk. If you would invest  1,120  in Rationalpier 88 Convertible on December 22, 2024 and sell it today you would lose (18.00) from holding Rationalpier 88 Convertible or give up 1.61% of portfolio value over 90 days.

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

Rationalpier 88 Convertible  vs.  Small Cap Growth

Rationalpier 88 Conv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rationalpier 88 Convertible has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Rational/pier is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Rational/pier and Small Cap

The main advantage of trading using opposite Rational/pier and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational/pier 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 Rationalpier 88 Convertible and Small Cap Growth 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.