Correlation Between Wcm Small and Wcm Focused

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

By analyzing existing cross correlation between Wcm Small Cap and Wcm Focused Global, you can compare the effects of market volatilities on Wcm Small and Wcm Focused 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 Wcm Small with a short position of Wcm Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wcm Small and Wcm Focused.

Diversification Opportunities for Wcm Small and Wcm Focused

0.67

Correlation Coefficient

Wcm Small  Wcm Focused

Poor diversification

The 3 months correlation between Wcm and Wcm is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Wcm Small Cap and Wcm Focused Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wcm Focused Global and Wcm Small 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 Wcm Small Cap are associated (or correlated) with Wcm Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wcm Focused Global has no effect on the direction of Wcm Small i.e., Wcm Small and Wcm Focused go up and down completely randomly.

Pair Corralation between Wcm Small and Wcm Focused

Assuming the 90 days horizon Wcm Small Cap is expected to generate 0.79 times more return on investment than Wcm Focused. However, Wcm Small Cap is 1.26 times less risky than Wcm Focused. It trades about -0.37 of its potential returns per unit of risk. Wcm Focused Global is currently generating about -0.33 per unit of risk. If you would invest  1,383  in Wcm Small Cap on October 3, 2024 and sell it today you would lose (114.00) from holding Wcm Small Cap or give up 8.24% of portfolio value over 90 days.

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

Wcm Small Cap  vs.  Wcm Focused Global

Wcm Small Cap

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wcm Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Wcm Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wcm Focused Global

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Wcm Focused Global are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Wcm Focused is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Wcm Small and Wcm Focused

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

The idea behind Wcm Small Cap and Wcm Focused Global 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.