Correlation Between Absolute Capital and Zacks Small-cap

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

By analyzing existing cross correlation between Absolute Capital Opportunities and Zacks Small Cap E, you can compare the effects of market volatilities on Absolute Capital and Zacks 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 Absolute Capital with a short position of Zacks Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Capital and Zacks Small-cap.

Diversification Opportunities for Absolute Capital and Zacks Small-cap

0.72

Correlation Coefficient

Absolute Capital  Zacks Small-cap

Poor diversification

The 3 months correlation between Absolute and Zacks is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Capital Opportunities and Zacks Small Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zacks Small Cap and Absolute Capital 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 Absolute Capital Opportunities are associated (or correlated) with Zacks 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 Zacks Small Cap has no effect on the direction of Absolute Capital i.e., Absolute Capital and Zacks Small-cap go up and down completely randomly.

Pair Corralation between Absolute Capital and Zacks Small-cap

Assuming the 90 days horizon Absolute Capital Opportunities is expected to under-perform the Zacks Small-cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Absolute Capital Opportunities is 3.07 times less risky than Zacks Small-cap. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Zacks Small Cap E is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,020  in Zacks Small Cap E on May 10, 2025 and sell it today you would earn a total of  92.00  from holding Zacks Small Cap E or generate 3.05% return on investment over 90 days.

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

Absolute Capital Opportunities  vs.  Zacks Small Cap E

Absolute Capital Opp

Risk-Adjusted Performance

Soft

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

Zacks Small Cap

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Zacks Small Cap E are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Zacks 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 Absolute Capital and Zacks Small-cap

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

The idea behind Absolute Capital Opportunities and Zacks Small Cap E 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.