Correlation Between Small Cap and 1290 Multi-alternativ

Can any of the company-specific risk be diversified away by investing in both Small Cap and 1290 Multi-alternativ 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 1290 Multi-alternativ 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 1290 Multi Alternative Strategies, you can compare the effects of market volatilities on Small Cap and 1290 Multi-alternativ 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 1290 Multi-alternativ. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and 1290 Multi-alternativ.

Diversification Opportunities for Small Cap and 1290 Multi-alternativ

0.85

Correlation Coefficient

Small Cap  1290 Multi-alternativ

Very poor diversification

The 3 months correlation between Small and 1290 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and 1290 Multi Alternative Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1290 Multi Alternative 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 1290 Multi-alternativ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1290 Multi Alternative has no effect on the direction of Small Cap i.e., Small Cap and 1290 Multi-alternativ go up and down completely randomly.

Pair Corralation between Small Cap and 1290 Multi-alternativ

Assuming the 90 days horizon Small Cap Stock is expected to under-perform the 1290 Multi-alternativ. In addition to that, Small Cap is 2.96 times more volatile than 1290 Multi Alternative Strategies. It trades about -0.36 of its total potential returns per unit of risk. 1290 Multi Alternative Strategies is currently generating about -0.22 per unit of volatility. If you would invest  965.00  in 1290 Multi Alternative Strategies on October 9, 2024 and sell it today you would lose (23.00) from holding 1290 Multi Alternative Strategies or give up 2.38% of portfolio value over 90 days.

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

Small Cap Stock  vs.  1290 Multi Alternative Strateg

Small Cap Stock

Risk-Adjusted Performance

0 of 100

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 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.

1290 Multi Alternative

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1290 Multi Alternative Strategies has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, 1290 Multi-alternativ 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 1290 Multi-alternativ

The main advantage of trading using opposite Small Cap and 1290 Multi-alternativ positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, 1290 Multi-alternativ 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 1290 Multi-alternativ will offset losses from the drop in 1290 Multi-alternativ's long position.

The idea behind Small Cap Stock and 1290 Multi Alternative Strategies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.