Correlation Between YieldMax N and Small Capitalization

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

By analyzing existing cross correlation between YieldMax N Option and Small Capitalization Portfolio, you can compare the effects of market volatilities on YieldMax N 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 YieldMax N with a short position of Small Capitalization. Check out your portfolio center. Please also check ongoing floating volatility patterns of YieldMax N and Small Capitalization.

Diversification Opportunities for YieldMax N and Small Capitalization

0.9

Correlation Coefficient

YieldMax N  Small Capitalization

Almost no diversification

The 3 months correlation between YieldMax and Small is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding YieldMax N Option and Small Capitalization Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Capitalization and YieldMax N 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 YieldMax N Option 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 YieldMax N i.e., YieldMax N and Small Capitalization go up and down completely randomly.

Pair Corralation between YieldMax N and Small Capitalization

Given the investment horizon of 90 days YieldMax N Option is expected to generate 3.07 times more return on investment than Small Capitalization. However, YieldMax N is 3.07 times more volatile than Small Capitalization Portfolio. It trades about 0.21 of its potential returns per unit of risk. Small Capitalization Portfolio is currently generating about 0.19 per unit of risk. If you would invest  593.00  in YieldMax N Option on May 1, 2025 and sell it today you would earn a total of  276.00  from holding YieldMax N Option or generate 46.54% return on investment over 90 days.

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

YieldMax N Option  vs.  Small Capitalization Portfolio

YieldMax N Option

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in YieldMax N Option are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, YieldMax N showed solid returns over the last few months and may actually be approaching a breakup point.

Small Capitalization

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Capitalization Portfolio are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Capitalization showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with YieldMax N and Small Capitalization

The main advantage of trading using opposite YieldMax N and Small Capitalization positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if YieldMax N 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 YieldMax N Option 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.