Correlation Between Small Cap and Short Term
Can any of the company-specific risk be diversified away by investing in both Small Cap and Short Term 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 Cap and Short Term into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth and Short Term Government Fund, you can compare the effects of market volatilities on Small Cap and Short Term 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 Cap with a short position of Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Short Term.
Diversification Opportunities for Small Cap and Short Term
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Small and Short is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Short Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Government and Small Cap 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 Cap Growth are associated (or correlated) with Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Government has no effect on the direction of Small Cap i.e., Small Cap and Short Term go up and down completely randomly.
Pair Corralation between Small Cap and Short Term
If you would invest 2,333 in Small Cap Growth on September 18, 2024 and sell it today you would earn a total of 89.00 from holding Small Cap Growth or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Small Cap Growth vs. Short Term Government Fund
Performance |
| Timeline |
| Small Cap Growth |
| Short Term Government |
Small Cap and Short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Short Term
The main advantage of trading using opposite Small Cap and Short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Short Term 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 Short Term will offset losses from the drop in Short Term's long position.| Small Cap vs. Mid Cap Value | Small Cap vs. Equity Growth Fund | Small Cap vs. Income Growth Fund | Small Cap vs. Diversified Bond Fund |
| Short Term vs. Mid Cap Value | Short Term vs. Equity Growth Fund | Short Term vs. Income Growth Fund | Short Term vs. Diversified Bond Fund |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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