Correlation Between Small Cap and Keeley Small

Can any of the company-specific risk be diversified away by investing in both Small Cap and Keeley Small 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 Keeley Small 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 Keeley Small Mid Cap, you can compare the effects of market volatilities on Small Cap and Keeley Small 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 Keeley Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Keeley Small.

Diversification Opportunities for Small Cap and Keeley Small

0.93

Correlation Coefficient

Small Cap  Keeley Small

Almost no diversification

The 3 months correlation between Small and Keeley is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Keeley Small Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keeley Small Mid 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 Keeley Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keeley Small Mid has no effect on the direction of Small Cap i.e., Small Cap and Keeley Small go up and down completely randomly.

Pair Corralation between Small Cap and Keeley Small

Assuming the 90 days horizon Small Cap is expected to generate 1.56 times less return on investment than Keeley Small. In addition to that, Small Cap is 1.25 times more volatile than Keeley Small Mid Cap. It trades about 0.04 of its total potential returns per unit of risk. Keeley Small Mid Cap is currently generating about 0.08 per unit of volatility. If you would invest  1,076  in Keeley Small Mid Cap on September 15, 2024 and sell it today you would earn a total of  14.00  from holding Keeley Small Mid Cap or generate 1.3% return on investment over 90 days.

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

Small Cap Stock  vs.  Keeley Small Mid Cap

Small Cap Stock

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Stock are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Keeley Small Mid

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keeley Small Mid Cap are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Keeley Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Small Cap and Keeley Small

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

The idea behind Small Cap Stock and Keeley Small Mid Cap 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.