Correlation Between Small Cap and Sachem Capital

Can any of the company-specific risk be diversified away by investing in both Small Cap and Sachem Capital 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 Sachem Capital 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 Sachem Capital Corp, you can compare the effects of market volatilities on Small Cap and Sachem Capital 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 Sachem Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Sachem Capital.

Diversification Opportunities for Small Cap and Sachem Capital

0.5

Correlation Coefficient

Small Cap  Sachem Capital

Very weak diversification

The 3 months correlation between Small and Sachem is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital Corp 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of Small Cap i.e., Small Cap and Sachem Capital go up and down completely randomly.

Pair Corralation between Small Cap and Sachem Capital

Considering the 90-day investment horizon Small Cap is expected to generate 1.61 times less return on investment than Sachem Capital. In addition to that, Small Cap is 2.27 times more volatile than Sachem Capital Corp. It trades about 0.05 of its total potential returns per unit of risk. Sachem Capital Corp is currently generating about 0.18 per unit of volatility. If you would invest  2,340  in Sachem Capital Corp on October 9, 2024 and sell it today you would earn a total of  158.00  from holding Sachem Capital Corp or generate 6.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.31%
Values	Daily Returns

Small Cap Premium  vs.  Sachem Capital Corp

Small Cap Premium

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Sachem Capital Corp

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Sachem Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Sachem Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Small Cap and Sachem Capital

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

The idea behind Small Cap Premium and Sachem Capital Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.