Correlation Between Perritt Microcap and James Small

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

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

Diversification Opportunities for Perritt Microcap and James Small

0.6

Correlation Coefficient

Perritt Microcap  James Small

Poor diversification

The 3 months correlation between Perritt and James is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Perritt Microcap Opportunities and James Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on James Small Cap and Perritt Microcap 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 Perritt Microcap Opportunities are associated (or correlated) with James Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of James Small Cap has no effect on the direction of Perritt Microcap i.e., Perritt Microcap and James Small go up and down completely randomly.

Pair Corralation between Perritt Microcap and James Small

Assuming the 90 days horizon Perritt Microcap Opportunities is expected to generate 0.81 times more return on investment than James Small. However, Perritt Microcap Opportunities is 1.24 times less risky than James Small. It trades about 0.07 of its potential returns per unit of risk. James Small Cap is currently generating about 0.01 per unit of risk. If you would invest  2,394  in Perritt Microcap Opportunities on October 24, 2024 and sell it today you would earn a total of  111.00  from holding Perritt Microcap Opportunities or generate 4.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Perritt Microcap Opportunities  vs.  James Small Cap

Perritt Microcap Opp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Perritt Microcap Opportunities are ranked lower than 5 (%) 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.

James Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Perritt Microcap and James Small

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

The idea behind Perritt Microcap Opportunities and James Small Cap 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..