Correlation Between Balanced Fund and Smallcap Value
Can any of the company-specific risk be diversified away by investing in both Balanced Fund and Smallcap 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 Balanced Fund and Smallcap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Retail and Smallcap Value Fund, you can compare the effects of market volatilities on Balanced Fund and Smallcap 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 Balanced Fund with a short position of Smallcap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Smallcap Value.
Diversification Opportunities for Balanced Fund and Smallcap Value
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Balanced and Smallcap is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Smallcap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Value and Balanced Fund 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 Balanced Fund Retail are associated (or correlated) with Smallcap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Value has no effect on the direction of Balanced Fund i.e., Balanced Fund and Smallcap Value go up and down completely randomly.
Pair Corralation between Balanced Fund and Smallcap Value
Assuming the 90 days horizon Balanced Fund is expected to generate 1.16 times less return on investment than Smallcap Value. But when comparing it to its historical volatility, Balanced Fund Retail is 2.29 times less risky than Smallcap Value. It trades about 0.1 of its potential returns per unit of risk. Smallcap Value Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,025 in Smallcap Value Fund on September 12, 2024 and sell it today you would earn a total of 334.00 from holding Smallcap Value Fund or generate 32.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Balanced Fund Retail vs. Smallcap Value Fund
Performance |
| Timeline |
| Balanced Fund Retail |
| Smallcap Value |
Balanced Fund and Smallcap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and Smallcap Value
The main advantage of trading using opposite Balanced Fund and Smallcap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund position performs unexpectedly, Smallcap 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 Smallcap Value will offset losses from the drop in Smallcap Value's long position.| Balanced Fund vs. Muirfield Fund Retail | Balanced Fund vs. Dynamic Growth Fund | Balanced Fund vs. Infrastructure Fund Retail | Balanced Fund vs. Quantex Fund Retail |
| Smallcap Value vs. Balanced Fund Retail | Smallcap Value vs. Ms Global Fixed | Smallcap Value vs. Multimedia Portfolio Multimedia | Smallcap Value vs. Cutler Equity |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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