Correlation Between Small Cap and Disciplined Growth
Can any of the company-specific risk be diversified away by investing in both Small Cap and Disciplined Growth 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 Disciplined Growth 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 Disciplined Growth Fund, you can compare the effects of market volatilities on Small Cap and Disciplined Growth 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 Disciplined Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Disciplined Growth.
Diversification Opportunities for Small Cap and Disciplined Growth
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Small and Disciplined is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Disciplined Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disciplined Growth 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 Disciplined Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disciplined Growth has no effect on the direction of Small Cap i.e., Small Cap and Disciplined Growth go up and down completely randomly.
Pair Corralation between Small Cap and Disciplined Growth
Assuming the 90 days horizon Small Cap Growth is expected to generate 0.24 times more return on investment than Disciplined Growth. However, Small Cap Growth is 4.14 times less risky than Disciplined Growth. It trades about 0.01 of its potential returns per unit of risk. Disciplined Growth Fund is currently generating about -0.11 per unit of risk. If you would invest 2,148 in Small Cap Growth on October 15, 2024 and sell it today you would earn a total of 6.00 from holding Small Cap Growth or generate 0.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Disciplined Growth Fund
Performance |
| Timeline |
| Small Cap Growth |
| Disciplined Growth |
Small Cap and Disciplined Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Disciplined Growth
The main advantage of trading using opposite Small Cap and Disciplined Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Disciplined Growth 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 Disciplined Growth will offset losses from the drop in Disciplined Growth's long position.| Small Cap vs. Focused Dynamic Growth | Small Cap vs. Heritage Fund Investor | Small Cap vs. Emerging Markets Fund | Small Cap vs. Small Cap Value |
| Disciplined Growth vs. Select Fund C | Disciplined Growth vs. Select Fund R | Disciplined Growth vs. Invesco Disciplined Equity | Disciplined Growth vs. American Beacon Bridgeway |
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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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