Correlation Between Trican Well and Small Capitalization
Can any of the company-specific risk be diversified away by investing in both Trican Well and Small Capitalization 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 Trican Well and Small Capitalization into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trican Well Service and Small Capitalization Portfolio, you can compare the effects of market volatilities on Trican Well and Small Capitalization 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 Trican Well with a short position of Small Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trican Well and Small Capitalization.
Diversification Opportunities for Trican Well and Small Capitalization
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Trican and Small is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Trican Well Service and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and Trican Well 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 Trican Well Service are associated (or correlated) with Small Capitalization. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Capitalization has no effect on the direction of Trican Well i.e., Trican Well and Small Capitalization go up and down completely randomly.
Pair Corralation between Trican Well and Small Capitalization
Assuming the 90 days trading horizon Trican Well Service is expected to generate 1.92 times more return on investment than Small Capitalization. However, Trican Well is 1.92 times more volatile than Small Capitalization Portfolio. It trades about 0.12 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about -0.28 per unit of risk. If you would invest 410.00 in Trican Well Service on January 24, 2024 and sell it today you would earn a total of 17.00 from holding Trican Well Service or generate 4.15% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Trican Well Service vs. Small Capitalization Portfolio
Performance |
Timeline |
Trican Well Service |
Small Capitalization |
Trican Well and Small Capitalization Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Trican Well and Small Capitalization
The main advantage of trading using opposite Trican Well and Small Capitalization positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trican Well position performs unexpectedly, Small Capitalization 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 Capitalization will offset losses from the drop in Small Capitalization's long position.The idea behind Trican Well Service and Small Capitalization Portfolio 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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