Correlation Between Small Cap and Glg Intl
Can any of the company-specific risk be diversified away by investing in both Small Cap and Glg Intl 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 Glg Intl 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 Glg Intl Small, you can compare the effects of market volatilities on Small Cap and Glg Intl 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 Glg Intl. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Glg Intl.
Diversification Opportunities for Small Cap and Glg Intl
Very poor diversification
The 3 months correlation between Small and Glg is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Glg Intl Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glg Intl Small 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 Glg Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glg Intl Small has no effect on the direction of Small Cap i.e., Small Cap and Glg Intl go up and down completely randomly.
Pair Corralation between Small Cap and Glg Intl
Assuming the 90 days horizon Small Cap is expected to generate 9.0 times less return on investment than Glg Intl. In addition to that, Small Cap is 1.19 times more volatile than Glg Intl Small. It trades about 0.0 of its total potential returns per unit of risk. Glg Intl Small is currently generating about 0.03 per unit of volatility. If you would invest 6,207 in Glg Intl Small on January 6, 2025 and sell it today you would earn a total of 1,013 from holding Glg Intl Small or generate 16.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Glg Intl Small
Performance |
| Timeline |
| Small Cap Value |
| Glg Intl Small |
Small Cap and Glg Intl Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Glg Intl
The main advantage of trading using opposite Small Cap and Glg Intl positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Glg Intl 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 Glg Intl will offset losses from the drop in Glg Intl'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 |
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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 Stocks Directory module to find actively traded stocks across global markets.
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