Correlation Between Small Cap and Select Fund
Can any of the company-specific risk be diversified away by investing in both Small Cap and Select Fund 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 Select Fund 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 Select Fund R, you can compare the effects of market volatilities on Small Cap and Select Fund 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 Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Select Fund.
Diversification Opportunities for Small Cap and Select Fund
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Select is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Select Fund R in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund R 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 Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund R has no effect on the direction of Small Cap i.e., Small Cap and Select Fund go up and down completely randomly.
Pair Corralation between Small Cap and Select Fund
Assuming the 90 days horizon Small Cap Growth is expected to under-perform the Select Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Growth is 1.32 times less risky than Select Fund. The mutual fund trades about -0.25 of its potential returns per unit of risk. The Select Fund R is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 11,517 in Select Fund R on September 28, 2024 and sell it today you would earn a total of 61.00 from holding Select Fund R or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Select Fund R
Performance |
| Timeline |
| Small Cap Growth |
| Select Fund R |
Small Cap and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Select Fund
The main advantage of trading using opposite Small Cap and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund'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 |
| Select Fund vs. Select Fund C | Select Fund vs. Ultra Fund C | Select Fund vs. Ultra Fund R6 | Select Fund vs. Nasdaq 100 Fund Class |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Stocks Directory Find actively traded stocks across global markets |