Correlation Between Small Cap and Wesmark Tactical

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

By analyzing existing cross correlation between Small Cap Growth and Wesmark Tactical Opportunity, you can compare the effects of market volatilities on Small Cap and Wesmark Tactical 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 Wesmark Tactical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Wesmark Tactical.

Diversification Opportunities for Small Cap and Wesmark Tactical

0.77

Correlation Coefficient

Small Cap  Wesmark Tactical

Poor diversification

The 3 months correlation between Small and Wesmark is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Wesmark Tactical Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesmark Tactical Opp 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 Growth are associated (or correlated) with Wesmark Tactical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesmark Tactical Opp has no effect on the direction of Small Cap i.e., Small Cap and Wesmark Tactical go up and down completely randomly.

Pair Corralation between Small Cap and Wesmark Tactical

Assuming the 90 days horizon Small Cap Growth is expected to generate 2.88 times more return on investment than Wesmark Tactical. However, Small Cap is 2.88 times more volatile than Wesmark Tactical Opportunity. It trades about 0.12 of its potential returns per unit of risk. Wesmark Tactical Opportunity is currently generating about 0.02 per unit of risk. If you would invest  2,084  in Small Cap Growth on September 15, 2024 and sell it today you would earn a total of  161.00  from holding Small Cap Growth or generate 7.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Small Cap Growth  vs.  Wesmark Tactical Opportunity

Small Cap Growth

Risk-Adjusted Performance

9 of 100

OK

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

Wesmark Tactical Opp

Risk-Adjusted Performance

1 of 100

Weak

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

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

The idea behind Small Cap Growth and Wesmark Tactical Opportunity 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.