Correlation Between Sierra Core and Small Company

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

By analyzing existing cross correlation between Sierra E Retirement and Small Pany Growth, you can compare the effects of market volatilities on Sierra Core and Small Company 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 Sierra Core with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sierra Core and Small Company.

Diversification Opportunities for Sierra Core and Small Company

0.37

Correlation Coefficient

Sierra Core  Small Company

Weak diversification

The 3 months correlation between Sierra and Small is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sierra E Retirement and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Sierra Core 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 Sierra E Retirement are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Sierra Core i.e., Sierra Core and Small Company go up and down completely randomly.

Pair Corralation between Sierra Core and Small Company

Assuming the 90 days horizon Sierra Core is expected to generate 25.12 times less return on investment than Small Company. But when comparing it to its historical volatility, Sierra E Retirement is 6.77 times less risky than Small Company. It trades about 0.09 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  1,121  in Small Pany Growth on September 5, 2024 and sell it today you would earn a total of  526.00  from holding Small Pany Growth or generate 46.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Sierra E Retirement  vs.  Small Pany Growth

Sierra E Retirement

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sierra E Retirement are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Sierra Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Pany Growth

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 27 (%) 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.

Pair Trading with Sierra Core and Small Company

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

The idea behind Sierra E Retirement and Small Pany Growth 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.