Correlation Between Global Gold and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Global Gold and Smallcap World 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 Global Gold and Smallcap World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Gold Fund and Smallcap World Fund, you can compare the effects of market volatilities on Global Gold and Smallcap World 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 Global Gold with a short position of Smallcap World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and Smallcap World.
Diversification Opportunities for Global Gold and Smallcap World
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Global and Smallcap is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Global Gold 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 Global Gold Fund are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Global Gold i.e., Global Gold and Smallcap World go up and down completely randomly.
Pair Corralation between Global Gold and Smallcap World
Assuming the 90 days horizon Global Gold Fund is expected to under-perform the Smallcap World. In addition to that, Global Gold is 2.17 times more volatile than Smallcap World Fund. It trades about -0.2 of its total potential returns per unit of risk. Smallcap World Fund is currently generating about -0.35 per unit of volatility. If you would invest 7,421 in Smallcap World Fund on October 9, 2024 and sell it today you would lose (409.00) from holding Smallcap World Fund or give up 5.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Gold Fund vs. Smallcap World Fund
Performance |
| Timeline |
| Global Gold Fund |
| Smallcap World |
Global Gold and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Gold and Smallcap World
The main advantage of trading using opposite Global Gold and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, Smallcap World 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 Smallcap World will offset losses from the drop in Smallcap World's long position.| Global Gold vs. Dws Government Money | Global Gold vs. Leader Short Term Bond | Global Gold vs. Bbh Intermediate Municipal | Global Gold vs. Georgia Tax Free Bond |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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