Correlation Between Swan Defined and Small Company

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

By analyzing existing cross correlation between Swan Defined Risk and Small Pany Value, you can compare the effects of market volatilities on Swan Defined and Small Company 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 Swan Defined with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Swan Defined and Small Company.

Diversification Opportunities for Swan Defined and Small Company

0.23

Correlation Coefficient

Swan Defined  Small Company

Modest diversification

The 3 months correlation between Swan and Small is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Swan Defined Risk and Small Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Value and Swan Defined 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 Swan Defined Risk are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Value has no effect on the direction of Swan Defined i.e., Swan Defined and Small Company go up and down completely randomly.

Pair Corralation between Swan Defined and Small Company

If you would invest  3,104  in Small Pany Value on April 21, 2025 and sell it today you would earn a total of  515.00  from holding Small Pany Value or generate 16.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

Swan Defined Risk  vs.  Small Pany Value

Swan Defined Risk

Risk-Adjusted Performance

Very Weak

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

Small Pany Value

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Value are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Small Company showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Swan Defined and Small Company

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

The idea behind Swan Defined Risk and Small Pany Value 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.