Correlation Between Small Cap and Global Hard
Can any of the company-specific risk be diversified away by investing in both Small Cap and Global Hard 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 Global Hard 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 Global Hard Assets, you can compare the effects of market volatilities on Small Cap and Global Hard 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 Global Hard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Global Hard.
Diversification Opportunities for Small Cap and Global Hard
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Small and Global is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Global Hard Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hard Assets 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 Global Hard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hard Assets has no effect on the direction of Small Cap i.e., Small Cap and Global Hard go up and down completely randomly.
Pair Corralation between Small Cap and Global Hard
Assuming the 90 days horizon Small Cap Growth is expected to generate 1.7 times more return on investment than Global Hard. However, Small Cap is 1.7 times more volatile than Global Hard Assets. It trades about 0.33 of its potential returns per unit of risk. Global Hard Assets is currently generating about 0.08 per unit of risk. If you would invest 1,852 in Small Cap Growth on September 3, 2024 and sell it today you would earn a total of 171.00 from holding Small Cap Growth or generate 9.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Global Hard Assets
Performance |
| Timeline |
| Small Cap Growth |
| Global Hard Assets |
Small Cap and Global Hard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Global Hard
The main advantage of trading using opposite Small Cap and Global Hard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Global Hard 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 Global Hard will offset losses from the drop in Global Hard's long position.| Small Cap vs. Goldman Sachs Real | Small Cap vs. Commonwealth Real Estate | Small Cap vs. Tiaa Cref Real Estate | Small Cap vs. Vanguard Reit Index |
| Global Hard vs. Semiconductor Ultrasector Profund | Global Hard vs. Issachar Fund Class | Global Hard vs. Nasdaq 100 Fund Class | Global Hard vs. Ab Small Cap |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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