Correlation Between Strategic Asset and Small Midcap

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

By analyzing existing cross correlation between Strategic Asset Management and Small Midcap Dividend Income, you can compare the effects of market volatilities on Strategic Asset and Small Midcap 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 Strategic Asset with a short position of Small Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Asset and Small Midcap.

Diversification Opportunities for Strategic Asset and Small Midcap

0.26

Correlation Coefficient

Strategic Asset  Small Midcap

Modest diversification

The 3 months correlation between Strategic and Small is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Asset Management and Small Midcap Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Midcap Dividend and Strategic Asset 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 Strategic Asset Management are associated (or correlated) with Small Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Midcap Dividend has no effect on the direction of Strategic Asset i.e., Strategic Asset and Small Midcap go up and down completely randomly.

Pair Corralation between Strategic Asset and Small Midcap

Assuming the 90 days horizon Strategic Asset is expected to generate 16.21 times less return on investment than Small Midcap. But when comparing it to its historical volatility, Strategic Asset Management is 3.64 times less risky than Small Midcap. It trades about 0.03 of its potential returns per unit of risk. Small Midcap Dividend Income is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,866  in Small Midcap Dividend Income on September 13, 2024 and sell it today you would earn a total of  129.00  from holding Small Midcap Dividend Income or generate 6.91% return on investment over 90 days.

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

Strategic Asset Management  vs.  Small Midcap Dividend Income

Strategic Asset Mana

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Asset Management are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking indicators, Strategic Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Midcap Dividend

Risk-Adjusted Performance

9 of 100

Good

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

Pair Trading with Strategic Asset and Small Midcap

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

The idea behind Strategic Asset Management and Small Midcap Dividend 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.