Correlation Between Fs Multi and Small Cap

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

By analyzing existing cross correlation between Fs Multi Strategy Alt and Small Cap Core, you can compare the effects of market volatilities on Fs Multi and Small Cap 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 Fs Multi with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fs Multi and Small Cap.

Diversification Opportunities for Fs Multi and Small Cap

0.71

Correlation Coefficient

Fs Multi  Small Cap

Poor diversification

The 3 months correlation between FSMMX and Small is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Fs Multi Strategy Alt and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Fs Multi 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 Fs Multi Strategy Alt are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of Fs Multi i.e., Fs Multi and Small Cap go up and down completely randomly.

Pair Corralation between Fs Multi and Small Cap

Assuming the 90 days horizon Fs Multi Strategy Alt is not expected to generate positive returns. However, Fs Multi Strategy Alt is 10.38 times less risky than Small Cap. It waists most of its returns potential to compensate for thr risk taken. Small Cap is generating about -0.26 per unit of risk. If you would invest  1,108  in Fs Multi Strategy Alt on January 20, 2024 and sell it today you would earn a total of  0.00  from holding Fs Multi Strategy Alt or generate 0.0% return on investment over 90 days.

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

Fs Multi Strategy Alt  vs.  Small Cap Core

Fs Multi Strategy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fs Multi Strategy Alt are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Fs Multi is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Core

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fs Multi and Small Cap

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

The idea behind Fs Multi Strategy Alt and Small Cap Core 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.