Correlation Between Small Capitalization and Locorr Strategic

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

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

Diversification Opportunities for Small Capitalization and Locorr Strategic

0.93

Correlation Coefficient

Small Capitalization  Locorr Strategic

Almost no diversification

The 3 months correlation between Small and Locorr is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Small Capitalization Portfolio and Locorr Strategic Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Strategic All and Small Capitalization 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 Small Capitalization Portfolio are associated (or correlated) with Locorr Strategic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Strategic All has no effect on the direction of Small Capitalization i.e., Small Capitalization and Locorr Strategic go up and down completely randomly.

Pair Corralation between Small Capitalization and Locorr Strategic

Assuming the 90 days horizon Small Capitalization Portfolio is expected to generate 2.62 times more return on investment than Locorr Strategic. However, Small Capitalization is 2.62 times more volatile than Locorr Strategic Allocation. It trades about 0.12 of its potential returns per unit of risk. Locorr Strategic Allocation is currently generating about 0.16 per unit of risk. If you would invest  35.00  in Small Capitalization Portfolio on May 17, 2025 and sell it today you would earn a total of  3.00  from holding Small Capitalization Portfolio or generate 8.57% return on investment over 90 days.

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

Small Capitalization Portfolio  vs.  Locorr Strategic Allocation

Small Capitalization

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Small Capitalization Portfolio are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Small Capitalization may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Locorr Strategic All

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Strategic Allocation are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Locorr Strategic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Capitalization and Locorr Strategic

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

The idea behind Small Capitalization Portfolio and Locorr Strategic Allocation 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..