Correlation Between Paradigm Select and Paradigm Micro-cap
Can any of the company-specific risk be diversified away by investing in both Paradigm Select and Paradigm Micro-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 Paradigm Select and Paradigm Micro-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paradigm Select Fund and Paradigm Micro Cap Fund, you can compare the effects of market volatilities on Paradigm Select and Paradigm Micro-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 Paradigm Select with a short position of Paradigm Micro-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paradigm Select and Paradigm Micro-cap.
Diversification Opportunities for Paradigm Select and Paradigm Micro-cap
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Paradigm and Paradigm is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Paradigm Select Fund and Paradigm Micro Cap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Paradigm Micro Cap and Paradigm Select 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 Paradigm Select Fund are associated (or correlated) with Paradigm Micro-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Paradigm Micro Cap has no effect on the direction of Paradigm Select i.e., Paradigm Select and Paradigm Micro-cap go up and down completely randomly.
Pair Corralation between Paradigm Select and Paradigm Micro-cap
Assuming the 90 days horizon Paradigm Select Fund is expected to generate 0.91 times more return on investment than Paradigm Micro-cap. However, Paradigm Select Fund is 1.09 times less risky than Paradigm Micro-cap. It trades about -0.19 of its potential returns per unit of risk. Paradigm Micro Cap Fund is currently generating about -0.28 per unit of risk. If you would invest 7,631 in Paradigm Select Fund on January 28, 2024 and sell it today you would lose (362.00) from holding Paradigm Select Fund or give up 4.74% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Paradigm Select Fund vs. Paradigm Micro Cap Fund
Performance |
Timeline |
Paradigm Select |
Paradigm Micro Cap |
Paradigm Select and Paradigm Micro-cap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Paradigm Select and Paradigm Micro-cap
The main advantage of trading using opposite Paradigm Select and Paradigm Micro-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paradigm Select position performs unexpectedly, Paradigm Micro-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 Paradigm Micro-cap will offset losses from the drop in Paradigm Micro-cap's long position.Paradigm Select vs. Vanguard Mid Cap Index | Paradigm Select vs. Vanguard Extended Market | Paradigm Select vs. Fidelity Extended Market |
Paradigm Micro-cap vs. Vanguard Small Cap Index | Paradigm Micro-cap vs. Fidelity Small Cap | Paradigm Micro-cap vs. T Rowe Price | Paradigm Micro-cap vs. T Rowe Price |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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