Correlation Between Small Cap and Robinson Opportunistic

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

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

Diversification Opportunities for Small Cap and Robinson Opportunistic

0.57

Correlation Coefficient

Small Cap  Robinson Opportunistic

Very weak diversification

The 3 months correlation between SMALL and Robinson is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Robinson Opportunistic Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Robinson Opportunistic 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 Value are associated (or correlated) with Robinson Opportunistic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Robinson Opportunistic has no effect on the direction of Small Cap i.e., Small Cap and Robinson Opportunistic go up and down completely randomly.

Pair Corralation between Small Cap and Robinson Opportunistic

Assuming the 90 days horizon Small Cap Value is expected to generate 4.76 times more return on investment than Robinson Opportunistic. However, Small Cap is 4.76 times more volatile than Robinson Opportunistic Income. It trades about 0.13 of its potential returns per unit of risk. Robinson Opportunistic Income is currently generating about 0.24 per unit of risk. If you would invest  1,099  in Small Cap Value on September 3, 2024 and sell it today you would earn a total of  120.00  from holding Small Cap Value or generate 10.92% return on investment over 90 days.

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

Small Cap Value  vs.  Robinson Opportunistic Income

Small Cap Value

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value are ranked lower than 10 (%) 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.

Robinson Opportunistic

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Robinson Opportunistic Income are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Robinson Opportunistic 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 Robinson Opportunistic

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

The idea behind Small Cap Value and Robinson Opportunistic Income 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.