Correlation Between Managed Volatility and Small-cap Value
Can any of the company-specific risk be diversified away by investing in both Managed Volatility and Small-cap Value 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 Managed Volatility and Small-cap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Managed Volatility Fund and Small Cap Value Fund, you can compare the effects of market volatilities on Managed Volatility and Small-cap Value 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 Managed Volatility with a short position of Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Managed Volatility and Small-cap Value.
Diversification Opportunities for Managed Volatility and Small-cap Value
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Managed and Small-cap is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Managed Volatility Fund and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Managed Volatility 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 Managed Volatility Fund are associated (or correlated) with Small-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Managed Volatility i.e., Managed Volatility and Small-cap Value go up and down completely randomly.
Pair Corralation between Managed Volatility and Small-cap Value
Assuming the 90 days horizon Managed Volatility Fund is expected to under-perform the Small-cap Value. In addition to that, Managed Volatility is 1.63 times more volatile than Small Cap Value Fund. It trades about -0.04 of its total potential returns per unit of risk. Small Cap Value Fund is currently generating about 0.09 per unit of volatility. If you would invest 3,137 in Small Cap Value Fund on August 25, 2024 and sell it today you would earn a total of 1,227 from holding Small Cap Value Fund or generate 39.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Managed Volatility Fund vs. Small Cap Value Fund
Performance |
| Timeline |
| Managed Volatility |
| Small Cap Value |
Managed Volatility and Small-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Managed Volatility and Small-cap Value
The main advantage of trading using opposite Managed Volatility and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Managed Volatility position performs unexpectedly, Small-cap Value 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 Small-cap Value will offset losses from the drop in Small-cap Value's long position.| Managed Volatility vs. Nuveen Short Term | Managed Volatility vs. Rbc Short Duration | Managed Volatility vs. Siit Ultra Short | Managed Volatility vs. Touchstone Ultra Short |
| Small-cap Value vs. Morgan Stanley Government | Small-cap Value vs. Cref Money Market | Small-cap Value vs. Transamerica Funds | Small-cap Value vs. Legg Mason Partners |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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