Correlation Between Small Cap and Alpine High

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

By analyzing existing cross correlation between Small Cap Stock and Alpine High Yield, you can compare the effects of market volatilities on Small Cap and Alpine High 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 Alpine High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Alpine High.

Diversification Opportunities for Small Cap and Alpine High

-0.54

Correlation Coefficient

Small Cap  Alpine High

Excellent diversification

The 3 months correlation between Small and Alpine is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Alpine High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpine High Yield 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 Stock are associated (or correlated) with Alpine High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpine High Yield has no effect on the direction of Small Cap i.e., Small Cap and Alpine High go up and down completely randomly.

Pair Corralation between Small Cap and Alpine High

Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Alpine High. In addition to that, Small Cap is 6.56 times more volatile than Alpine High Yield. It trades about -0.1 of its total potential returns per unit of risk. Alpine High Yield is currently generating about 0.03 per unit of volatility. If you would invest  908.00  in Alpine High Yield on December 28, 2024 and sell it today you would earn a total of  3.00  from holding Alpine High Yield or generate 0.33% return on investment over 90 days.

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

Small Cap Stock  vs.  Alpine High Yield

Small Cap Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Alpine High Yield

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alpine High Yield are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Alpine High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Alpine High

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

The idea behind Small Cap Stock and Alpine High Yield 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.