Correlation Between Russell 2000 and Firsthand Technology

Can any of the company-specific risk be diversified away by investing in both Russell 2000 and Firsthand Technology 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 Russell 2000 and Firsthand Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Russell 2000 2x and Firsthand Technology Opportunities, you can compare the effects of market volatilities on Russell 2000 and Firsthand Technology 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 Russell 2000 with a short position of Firsthand Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Russell 2000 and Firsthand Technology.

Diversification Opportunities for Russell 2000 and Firsthand Technology

0.62

Correlation Coefficient

Russell 2000  Firsthand Technology

Poor diversification

The 3 months correlation between Russell and Firsthand is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Russell 2000 2x and Firsthand Technology Opportuni in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firsthand Technology and Russell 2000 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 Russell 2000 2x are associated (or correlated) with Firsthand Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firsthand Technology has no effect on the direction of Russell 2000 i.e., Russell 2000 and Firsthand Technology go up and down completely randomly.

Pair Corralation between Russell 2000 and Firsthand Technology

Assuming the 90 days horizon Russell 2000 2x is expected to generate 1.46 times more return on investment than Firsthand Technology. However, Russell 2000 is 1.46 times more volatile than Firsthand Technology Opportunities. It trades about 0.03 of its potential returns per unit of risk. Firsthand Technology Opportunities is currently generating about -0.03 per unit of risk. If you would invest  12,381  in Russell 2000 2x on October 4, 2024 and sell it today you would earn a total of  1,596  from holding Russell 2000 2x or generate 12.89% return on investment over 90 days.

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

Russell 2000 2x  vs.  Firsthand Technology Opportuni

Russell 2000 2x

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Russell 2000 2x has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Russell 2000 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Firsthand Technology

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Firsthand Technology Opportunities are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Firsthand Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Russell 2000 and Firsthand Technology

The main advantage of trading using opposite Russell 2000 and Firsthand Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Russell 2000 position performs unexpectedly, Firsthand Technology 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 Firsthand Technology will offset losses from the drop in Firsthand Technology's long position.

The idea behind Russell 2000 2x and Firsthand Technology Opportunities 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.