Correlation Between Small Company and Emerald Growth

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

By analyzing existing cross correlation between Small Pany Growth and Emerald Growth Fund, you can compare the effects of market volatilities on Small Company and Emerald Growth 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 Company with a short position of Emerald Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Emerald Growth.

Diversification Opportunities for Small Company and Emerald Growth

0.87

Correlation Coefficient

Small Company  Emerald Growth

Very poor diversification

The 3 months correlation between Small and EMERALD is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Emerald Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerald Growth and Small Company 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 Pany Growth are associated (or correlated) with Emerald Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerald Growth has no effect on the direction of Small Company i.e., Small Company and Emerald Growth go up and down completely randomly.

Pair Corralation between Small Company and Emerald Growth

Assuming the 90 days horizon Small Pany Growth is expected to generate 0.72 times more return on investment than Emerald Growth. However, Small Pany Growth is 1.39 times less risky than Emerald Growth. It trades about 0.07 of its potential returns per unit of risk. Emerald Growth Fund is currently generating about 0.02 per unit of risk. If you would invest  2,042  in Small Pany Growth on October 26, 2024 and sell it today you would earn a total of  111.00  from holding Small Pany Growth or generate 5.44% return on investment over 90 days.

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

Small Pany Growth  vs.  Emerald Growth Fund

Small Pany Growth

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Small Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Emerald Growth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Emerald Growth Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Emerald Growth 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 Company and Emerald Growth

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

The idea behind Small Pany Growth and Emerald Growth Fund 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.