Correlation Between Smallcap World and Sp Midcap
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Sp Midcap 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 Smallcap World and Sp Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Sp Midcap Index, you can compare the effects of market volatilities on Smallcap World and Sp Midcap 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 Smallcap World with a short position of Sp Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Sp Midcap.
Diversification Opportunities for Smallcap World and Sp Midcap
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smallcap and SPMIX is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Sp Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Midcap Index and Smallcap World 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 Smallcap World Fund are associated (or correlated) with Sp Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Midcap Index has no effect on the direction of Smallcap World i.e., Smallcap World and Sp Midcap go up and down completely randomly.
Pair Corralation between Smallcap World and Sp Midcap
Assuming the 90 days horizon Smallcap World Fund is expected to under-perform the Sp Midcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Smallcap World Fund is 1.27 times less risky than Sp Midcap. The mutual fund trades about -0.36 of its potential returns per unit of risk. The Sp Midcap Index is currently generating about -0.22 of returns per unit of risk over similar time horizon. If you would invest 2,690 in Sp Midcap Index on October 11, 2024 and sell it today you would lose (125.00) from holding Sp Midcap Index or give up 4.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Sp Midcap Index
Performance |
| Timeline |
| Smallcap World |
| Sp Midcap Index |
Smallcap World and Sp Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Sp Midcap
The main advantage of trading using opposite Smallcap World and Sp Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Sp Midcap 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 Sp Midcap will offset losses from the drop in Sp Midcap's long position.| Smallcap World vs. Baird Midcap Fund | Smallcap World vs. Rational Defensive Growth | Smallcap World vs. Small Pany Growth | Smallcap World vs. Needham Aggressive Growth |
| Sp Midcap vs. Locorr Dynamic Equity | Sp Midcap vs. Ab Equity Income | Sp Midcap vs. Dws Equity Sector | Sp Midcap vs. Smallcap World Fund |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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