Correlation Between 49327M3H5 and Small Cap

Can any of the company-specific risk be diversified away by investing in both 49327M3H5 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 49327M3H5 and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KEY 5 26 JAN 33 and Small Cap Premium, you can compare the effects of market volatilities on 49327M3H5 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 49327M3H5 with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of 49327M3H5 and Small Cap.

Diversification Opportunities for 49327M3H5 and Small Cap

-0.36

Correlation Coefficient

49327M3H5  Small Cap

Very good diversification

The 3 months correlation between 49327M3H5 and Small is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding KEY 5 26 JAN 33 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 49327M3H5 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 KEY 5 26 JAN 33 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 49327M3H5 i.e., 49327M3H5 and Small Cap go up and down completely randomly.

Pair Corralation between 49327M3H5 and Small Cap

Assuming the 90 days trading horizon KEY 5 26 JAN 33 is expected to generate 9.32 times more return on investment than Small Cap. However, 49327M3H5 is 9.32 times more volatile than Small Cap Premium. It trades about 0.02 of its potential returns per unit of risk. Small Cap Premium is currently generating about -0.05 per unit of risk. If you would invest  9,758  in KEY 5 26 JAN 33 on September 29, 2024 and sell it today you would lose (86.00) from holding KEY 5 26 JAN 33 or give up 0.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

KEY 5 26 JAN 33  vs.  Small Cap Premium

49327M3H5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KEY 5 26 JAN 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 49327M3H5 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Premium

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Premium are ranked lower than 4 (%) 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.

Pair Trading with 49327M3H5 and Small Cap

The main advantage of trading using opposite 49327M3H5 and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 49327M3H5 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 KEY 5 26 JAN 33 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.