Correlation Between Enhanced Fixed and Small-cap Value
Can any of the company-specific risk be diversified away by investing in both Enhanced Fixed and Small-cap Value 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 Enhanced Fixed and Small-cap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enhanced Fixed Income and Small Cap Value Fund, you can compare the effects of market volatilities on Enhanced Fixed and Small-cap Value 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 Enhanced Fixed with a short position of Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced Fixed and Small-cap Value.
Diversification Opportunities for Enhanced Fixed and Small-cap Value
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Enhanced and Small-cap is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Fixed Income and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Enhanced Fixed 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 Enhanced Fixed Income are associated (or correlated) with Small-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Enhanced Fixed i.e., Enhanced Fixed and Small-cap Value go up and down completely randomly.
Pair Corralation between Enhanced Fixed and Small-cap Value
Assuming the 90 days horizon Enhanced Fixed is expected to generate 2.16 times less return on investment than Small-cap Value. But when comparing it to its historical volatility, Enhanced Fixed Income is 3.5 times less risky than Small-cap Value. It trades about 0.26 of its potential returns per unit of risk. Small Cap Value Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,718 in Small Cap Value Fund on October 30, 2024 and sell it today you would earn a total of 111.00 from holding Small Cap Value Fund or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enhanced Fixed Income vs. Small Cap Value Fund
Performance |
| Timeline |
| Enhanced Fixed Income |
| Small Cap Value |
Enhanced Fixed and Small-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enhanced Fixed and Small-cap Value
The main advantage of trading using opposite Enhanced Fixed and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhanced Fixed position performs unexpectedly, Small-cap Value 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-cap Value will offset losses from the drop in Small-cap Value's long position.| Enhanced Fixed vs. Calvert Conservative Allocation | Enhanced Fixed vs. Stone Ridge Diversified | Enhanced Fixed vs. Global Diversified Income | Enhanced Fixed vs. Valic Company I |
| Small-cap Value vs. Federated Ohio Municipal | Small-cap Value vs. Franklin Government Money | Small-cap Value vs. Transamerica Intermediate Muni | Small-cap Value vs. Artisan High Income |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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