Correlation Between Focused Dynamic and Small Cap
Can any of the company-specific risk be diversified away by investing in both Focused Dynamic and Small 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 Focused Dynamic and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focused Dynamic Growth and Small Cap Growth, you can compare the effects of market volatilities on Focused Dynamic and Small 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 Focused Dynamic with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focused Dynamic and Small Cap.
Diversification Opportunities for Focused Dynamic and Small Cap
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Focused and Small is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Focused Dynamic Growth and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Focused Dynamic 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 Focused Dynamic Growth are associated (or correlated) with Small Cap. 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 Growth has no effect on the direction of Focused Dynamic i.e., Focused Dynamic and Small Cap go up and down completely randomly.
Pair Corralation between Focused Dynamic and Small Cap
Assuming the 90 days horizon Focused Dynamic is expected to generate 1.03 times less return on investment than Small Cap. But when comparing it to its historical volatility, Focused Dynamic Growth is 1.1 times less risky than Small Cap. It trades about 0.35 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,114 in Small Cap Growth on September 3, 2024 and sell it today you would earn a total of 196.00 from holding Small Cap Growth or generate 9.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Focused Dynamic Growth vs. Small Cap Growth
Performance |
| Timeline |
| Focused Dynamic Growth |
| Small Cap Growth |
Focused Dynamic and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Focused Dynamic and Small Cap
The main advantage of trading using opposite Focused Dynamic and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focused Dynamic position performs unexpectedly, Small 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 Small Cap will offset losses from the drop in Small Cap's long position.| Focused Dynamic vs. Growth Portfolio Class | Focused Dynamic vs. Small Cap Growth | Focused Dynamic vs. Brown Advisory Sustainable | Focused Dynamic vs. Morgan Stanley Multi |
| Small Cap vs. Vanguard International Growth | Small Cap vs. Vanguard Windsor Fund | Small Cap vs. SCOR PK | Small Cap vs. HUMANA INC |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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