Correlation Between Small Company and Mm Sp

Can any of the company-specific risk be diversified away by investing in both Small Company and Mm Sp 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 Mm Sp 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 Mm Sp 500, you can compare the effects of market volatilities on Small Company and Mm Sp 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 Mm Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Company and Mm Sp.

Diversification Opportunities for Small Company and Mm Sp

0.87

Correlation Coefficient

Small Company  Mm Sp

Very poor diversification

The 3 months correlation between Small and MIEYX is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Mm Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mm Sp 500 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 Mm Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mm Sp 500 has no effect on the direction of Small Company i.e., Small Company and Mm Sp go up and down completely randomly.

Pair Corralation between Small Company and Mm Sp

Assuming the 90 days horizon Small Pany Growth is expected to generate 2.76 times more return on investment than Mm Sp. However, Small Company is 2.76 times more volatile than Mm Sp 500. It trades about 0.66 of its potential returns per unit of risk. Mm Sp 500 is currently generating about 0.38 per unit of risk. If you would invest  1,285  in Small Pany Growth on September 4, 2024 and sell it today you would earn a total of  384.00  from holding Small Pany Growth or generate 29.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Small Pany Growth  vs.  Mm Sp 500

Small Pany Growth

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Company showed solid returns over the last few months and may actually be approaching a breakup point.

Mm Sp 500

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mm Sp 500 are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mm Sp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Small Company and Mm Sp

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

The idea behind Small Pany Growth and Mm Sp 500 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.