Correlation Between Barings Us and Small Cap
Can any of the company-specific risk be diversified away by investing in both Barings Us and Small Cap 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 Barings Us and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barings High Yield and Small Cap Equity, you can compare the effects of market volatilities on Barings Us and Small Cap 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 Barings Us with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Us and Small Cap.
Diversification Opportunities for Barings Us and Small Cap
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Barings and Small is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Barings High Yield and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Barings Us 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 Barings High Yield are associated (or correlated) with Small Cap. 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 Equity has no effect on the direction of Barings Us i.e., Barings Us and Small Cap go up and down completely randomly.
Pair Corralation between Barings Us and Small Cap
Assuming the 90 days horizon Barings Us is expected to generate 1.62 times less return on investment than Small Cap. But when comparing it to its historical volatility, Barings High Yield is 6.69 times less risky than Small Cap. It trades about 0.21 of its potential returns per unit of risk. Small Cap Equity is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,702 in Small Cap Equity on November 1, 2024 and sell it today you would earn a total of 163.00 from holding Small Cap Equity or generate 9.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Barings High Yield vs. Small Cap Equity
Performance |
| Timeline |
| Barings High Yield |
| Small Cap Equity |
Barings Us and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barings Us and Small Cap
The main advantage of trading using opposite Barings Us and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barings Us position performs unexpectedly, Small Cap 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 will offset losses from the drop in Small Cap's long position.| Barings Us vs. Virtus High Yield | Barings Us vs. Ab High Income | Barings Us vs. Prudential High Yield | Barings Us vs. Millerhoward High Income |
| Small Cap vs. First Trust Specialty | Small Cap vs. Blackstone Secured Lending | Small Cap vs. Financials Ultrasector Profund | Small Cap vs. Financials Ultrasector Profund |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA |