Correlation Between Small Cap and Us Small
Can any of the company-specific risk be diversified away by investing in both Small Cap and Us Small 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 Us Small 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 Us Small Cap, you can compare the effects of market volatilities on Small Cap and Us Small 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 Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Us Small.
Diversification Opportunities for Small Cap and Us Small
Almost no diversification
The 3 months correlation between SMALL and RLESX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Small Cap 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 Us Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of Small Cap i.e., Small Cap and Us Small go up and down completely randomly.
Pair Corralation between Small Cap and Us Small
Assuming the 90 days horizon Small Cap is expected to generate 1.04 times less return on investment than Us Small. But when comparing it to its historical volatility, Small Cap Growth is 1.15 times less risky than Us Small. It trades about 0.25 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,889 in Us Small Cap on August 29, 2024 and sell it today you would earn a total of 237.00 from holding Us Small Cap or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth vs. Us Small Cap
Performance |
| Timeline |
| Small Cap Growth |
| Us Small Cap |
Small Cap and Us Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Us Small
The main advantage of trading using opposite Small Cap and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Us Small 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 Us Small will offset losses from the drop in Us Small's long position.| Small Cap vs. Putnam Equity Income | Small Cap vs. Putnam Growth Opportunities | Small Cap vs. HUMANA INC | Small Cap vs. Aquagold International |
| Us Small vs. Prudential Jennison International | Us Small vs. Fidelity New Markets | Us Small vs. Ohio Variable College |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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