Correlation Between Saat Moderate and Small Capitalization

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

By analyzing existing cross correlation between Saat Moderate Strategy and Small Capitalization Portfolio, you can compare the effects of market volatilities on Saat Moderate and Small Capitalization 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 Saat Moderate with a short position of Small Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saat Moderate and Small Capitalization.

Diversification Opportunities for Saat Moderate and Small Capitalization

0.23

Correlation Coefficient

Saat Moderate  Small Capitalization

Modest diversification

The 3 months correlation between Saat and Small is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Saat Moderate Strategy and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and Saat Moderate 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 Saat Moderate Strategy are associated (or correlated) with Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Saat Moderate i.e., Saat Moderate and Small Capitalization go up and down completely randomly.

Pair Corralation between Saat Moderate and Small Capitalization

Assuming the 90 days horizon Saat Moderate is expected to generate 5.01 times less return on investment than Small Capitalization. But when comparing it to its historical volatility, Saat Moderate Strategy is 6.37 times less risky than Small Capitalization. It trades about 0.37 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  774.00  in Small Capitalization Portfolio on September 1, 2024 and sell it today you would earn a total of  74.00  from holding Small Capitalization Portfolio or generate 9.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Saat Moderate Strategy  vs.  Small Capitalization Portfolio

Saat Moderate Strategy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Saat Moderate Strategy are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Saat Moderate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Capitalization

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Capitalization Portfolio are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Capitalization may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Saat Moderate and Small Capitalization

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

The idea behind Saat Moderate Strategy and Small Capitalization Portfolio 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 CEOs Directory module to screen CEOs from public companies around the world.