Correlation Between Small Cap and Us Global
Can any of the company-specific risk be diversified away by investing in both Small Cap and Us Global 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 Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Us Global Investors, you can compare the effects of market volatilities on Small Cap and Us Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Us Global.
Diversification Opportunities for Small Cap and Us Global
Poor diversification
The 3 months correlation between Small and USLUX is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Us Global Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Global Investors 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 Value are associated (or correlated) with Us Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Global Investors has no effect on the direction of Small Cap i.e., Small Cap and Us Global go up and down completely randomly.
Pair Corralation between Small Cap and Us Global
Assuming the 90 days horizon Small Cap is expected to generate 1.39 times less return on investment than Us Global. In addition to that, Small Cap is 1.25 times more volatile than Us Global Investors. It trades about 0.02 of its total potential returns per unit of risk. Us Global Investors is currently generating about 0.03 per unit of volatility. If you would invest 1,835 in Us Global Investors on October 27, 2024 and sell it today you would earn a total of 288.00 from holding Us Global Investors or generate 15.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Us Global Investors
Performance |
| Timeline |
| Small Cap Value |
| Us Global Investors |
Small Cap and Us Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Us Global
The main advantage of trading using opposite Small Cap and Us Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Us Global 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 Global will offset losses from the drop in Us Global's long position.| Small Cap vs. Value Fund Investor | Small Cap vs. Small Pany Fund | Small Cap vs. Mid Cap Value | Small Cap vs. Equity Income Fund |
| Us Global vs. Elfun Government Money | Us Global vs. Dreyfus Government Cash | Us Global vs. Us Government Securities | Us Global vs. Schwab Government Money |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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