Correlation Between Small-company Stock and Falcon Focus

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

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

Diversification Opportunities for Small-company Stock and Falcon Focus

0.0

Correlation Coefficient

Small-company Stock  Falcon Focus

Pay attention - limited upside

The 3 months correlation between Small-company and Falcon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Small Company Stock Fund and Falcon Focus Scv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Focus Scv and Small-company Stock 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 Company Stock Fund are associated (or correlated) with Falcon Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Focus Scv has no effect on the direction of Small-company Stock i.e., Small-company Stock and Falcon Focus go up and down completely randomly.

Pair Corralation between Small-company Stock and Falcon Focus

If you would invest  2,713  in Small Company Stock Fund on September 5, 2024 and sell it today you would earn a total of  253.00  from holding Small Company Stock Fund or generate 9.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Small Company Stock Fund  vs.  Falcon Focus Scv

Small-company Stock

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Small Company Stock Fund are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small-company Stock showed solid returns over the last few months and may actually be approaching a breakup point.

Falcon Focus Scv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Focus Scv has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Falcon Focus 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 Stock and Falcon Focus

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

The idea behind Small Company Stock Fund and Falcon Focus Scv 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.