Correlation Between Small Cap and Sustainable Equity
Can any of the company-specific risk be diversified away by investing in both Small Cap and Sustainable Equity 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 Sustainable Equity 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 Sustainable Equity Fund, you can compare the effects of market volatilities on Small Cap and Sustainable Equity 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 Sustainable Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Sustainable Equity.
Diversification Opportunities for Small Cap and Sustainable Equity
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Sustainable is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Sustainable Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sustainable Equity 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 Sustainable Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sustainable Equity has no effect on the direction of Small Cap i.e., Small Cap and Sustainable Equity go up and down completely randomly.
Pair Corralation between Small Cap and Sustainable Equity
Assuming the 90 days horizon Small Cap Growth is expected to generate 1.26 times more return on investment than Sustainable Equity. However, Small Cap is 1.26 times more volatile than Sustainable Equity Fund. It trades about 0.07 of its potential returns per unit of risk. Sustainable Equity Fund is currently generating about 0.05 per unit of risk. If you would invest 1,869 in Small Cap Growth on November 3, 2024 and sell it today you would earn a total of 413.00 from holding Small Cap Growth or generate 22.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Small Cap Growth vs. Sustainable Equity Fund
Performance |
| Timeline |
| Small Cap Growth |
| Sustainable Equity |
Small Cap and Sustainable Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Sustainable Equity
The main advantage of trading using opposite Small Cap and Sustainable Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Sustainable Equity 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 Sustainable Equity will offset losses from the drop in Sustainable Equity'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 |
| Sustainable Equity vs. Disciplined Growth Fund | Sustainable Equity vs. Focused Dynamic Growth | Sustainable Equity vs. Small Cap Growth | Sustainable Equity vs. Mid Cap Value |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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