Correlation Between Sphere Entertainment and Small Cap

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

By analyzing existing cross correlation between Sphere Entertainment Co and Small Cap Premium, you can compare the effects of market volatilities on Sphere Entertainment and Small Cap 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 Sphere Entertainment with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sphere Entertainment and Small Cap.

Diversification Opportunities for Sphere Entertainment and Small Cap

0.12

Correlation Coefficient

Sphere Entertainment  Small Cap

Average diversification

The 3 months correlation between Sphere and Small is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Small Cap Premium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Premium and Sphere Entertainment 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 Sphere Entertainment Co are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Premium has no effect on the direction of Sphere Entertainment i.e., Sphere Entertainment and Small Cap go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Small Cap

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Small Cap. In addition to that, Sphere Entertainment is 8.33 times more volatile than Small Cap Premium. It trades about -0.06 of its total potential returns per unit of risk. Small Cap Premium is currently generating about 0.0 per unit of volatility. If you would invest  2,463  in Small Cap Premium on December 19, 2024 and sell it today you would lose (3.00) from holding Small Cap Premium or give up 0.12% of portfolio value over 90 days.

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

Sphere Entertainment Co  vs.  Small Cap Premium

Sphere Entertainment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Small Cap Premium

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Premium has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Sphere Entertainment and Small Cap

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

The idea behind Sphere Entertainment Co and Small Cap Premium 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.