Correlation Between Small Cap and Victory Integrity

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

Diversification Opportunities for Small Cap and Victory Integrity

0.81

Correlation Coefficient

Small Cap  Victory Integrity

Very poor diversification

The 3 months correlation between Small and Victory is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Victory Integrity Smallmid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Integrity 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 Victory Integrity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Integrity has no effect on the direction of Small Cap i.e., Small Cap and Victory Integrity go up and down completely randomly.

Pair Corralation between Small Cap and Victory Integrity

Assuming the 90 days horizon Small Cap is expected to generate 1.06 times less return on investment than Victory Integrity. In addition to that, Small Cap is 1.19 times more volatile than Victory Integrity Smallmid Cap. It trades about 0.16 of its total potential returns per unit of risk. Victory Integrity Smallmid Cap is currently generating about 0.2 per unit of volatility. If you would invest  2,224  in Victory Integrity Smallmid Cap on September 6, 2024 and sell it today you would earn a total of  308.00  from holding Victory Integrity Smallmid Cap or generate 13.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Small Cap Stock  vs.  Victory Integrity Smallmid Cap

Small Cap Stock

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Stock are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Victory Integrity

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Integrity Smallmid Cap are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Victory Integrity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small Cap and Victory Integrity

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

The idea behind Small Cap Stock and Victory Integrity Smallmid 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..