Correlation Between Ultrasmall Cap and Western Asset

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

By analyzing existing cross correlation between Ultrasmall Cap Profund Ultrasmall Cap and Western Asset Total, you can compare the effects of market volatilities on Ultrasmall Cap and Western Asset 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 Ultrasmall Cap with a short position of Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ultrasmall Cap and Western Asset.

Diversification Opportunities for Ultrasmall Cap and Western Asset

-0.19

Correlation Coefficient

Ultrasmall Cap  Western Asset

Good diversification

The 3 months correlation between Ultrasmall and Western is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Ultrasmall Cap Profund Ultrasm and Western Asset Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Total and Ultrasmall 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 Ultrasmall Cap Profund Ultrasmall Cap are associated (or correlated) with Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Total has no effect on the direction of Ultrasmall Cap i.e., Ultrasmall Cap and Western Asset go up and down completely randomly.

Pair Corralation between Ultrasmall Cap and Western Asset

Assuming the 90 days horizon Ultrasmall Cap Profund Ultrasmall Cap is expected to generate 14.49 times more return on investment than Western Asset. However, Ultrasmall Cap is 14.49 times more volatile than Western Asset Total. It trades about 0.14 of its potential returns per unit of risk. Western Asset Total is currently generating about -0.01 per unit of risk. If you would invest  6,324  in Ultrasmall Cap Profund Ultrasmall Cap on September 12, 2024 and sell it today you would earn a total of  1,427  from holding Ultrasmall Cap Profund Ultrasmall Cap or generate 22.56% return on investment over 90 days.

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

Ultrasmall Cap Profund Ultrasm  vs.  Western Asset Total

Ultrasmall Cap Profund

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrasmall Cap Profund Ultrasmall Cap are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ultrasmall Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Western Asset Total

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Asset Total has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Western Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultrasmall Cap and Western Asset

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

The idea behind Ultrasmall Cap Profund Ultrasmall Cap and Western Asset Total 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.