Correlation Between Small Cap and PACIFIC

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

Diversification Opportunities for Small Cap and PACIFIC

-0.33

Correlation Coefficient

Small Cap  PACIFIC

Very good diversification

The 3 months correlation between Small and PACIFIC is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and PACIFIC GAS AND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACIFIC GAS AND 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 PACIFIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACIFIC GAS AND has no effect on the direction of Small Cap i.e., Small Cap and PACIFIC go up and down completely randomly.

Pair Corralation between Small Cap and PACIFIC

Considering the 90-day investment horizon Small Cap Premium is expected to generate 1.81 times more return on investment than PACIFIC. However, Small Cap is 1.81 times more volatile than PACIFIC GAS AND. It trades about 0.02 of its potential returns per unit of risk. PACIFIC GAS AND is currently generating about -0.12 per unit of risk. If you would invest  2,419  in Small Cap Premium on October 23, 2024 and sell it today you would earn a total of  12.00  from holding Small Cap Premium or generate 0.5% return on investment over 90 days.

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

Small Cap Premium  vs.  PACIFIC GAS AND

Small Cap Premium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 1 (%) 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.

PACIFIC GAS AND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PACIFIC GAS AND has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PACIFIC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and PACIFIC

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

The idea behind Small Cap Premium and PACIFIC GAS AND 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.