Correlation Between Small Cap and Cedar Realty
Can any of the company-specific risk be diversified away by investing in both Small Cap and Cedar Realty 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 Cap and Cedar Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and Cedar Realty Trust, you can compare the effects of market volatilities on Small Cap and Cedar Realty 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 Cap with a short position of Cedar Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Cedar Realty.
Diversification Opportunities for Small Cap and Cedar Realty
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and Cedar is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Cedar Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cedar Realty Trust and Small Cap 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 Cap Premium are associated (or correlated) with Cedar Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cedar Realty Trust has no effect on the direction of Small Cap i.e., Small Cap and Cedar Realty go up and down completely randomly.
Pair Corralation between Small Cap and Cedar Realty
Considering the 90-day investment horizon Small Cap is expected to generate 10.55 times less return on investment than Cedar Realty. But when comparing it to its historical volatility, Small Cap Premium is 14.47 times less risky than Cedar Realty. It trades about 0.18 of its potential returns per unit of risk. Cedar Realty Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,572 in Cedar Realty Trust on December 2, 2024 and sell it today you would earn a total of 158.00 from holding Cedar Realty Trust or generate 10.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Small Cap Premium vs. Cedar Realty Trust
Performance |
Timeline |
Small Cap Premium |
Cedar Realty Trust |
Small Cap and Cedar Realty Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and Cedar Realty
The main advantage of trading using opposite Small Cap and Cedar Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Cedar Realty 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 Cedar Realty will offset losses from the drop in Cedar Realty's long position.Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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