Correlation Between International Fund and Small Cap
Can any of the company-specific risk be diversified away by investing in both International Fund 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 International Fund and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Fund International and Small Cap Equity, you can compare the effects of market volatilities on International Fund 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 International Fund with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Fund and Small Cap.
Diversification Opportunities for International Fund and Small Cap
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between International and Small is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding International Fund Internation 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 International 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 International Fund International 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 International Fund i.e., International Fund and Small Cap go up and down completely randomly.
Pair Corralation between International Fund and Small Cap
Assuming the 90 days horizon International Fund International is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, International Fund International is 2.0 times less risky than Small Cap. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Small Cap Equity is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,412 in Small Cap Equity on August 25, 2024 and sell it today you would earn a total of 163.00 from holding Small Cap Equity or generate 4.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Fund Internation vs. Small Cap Equity
Performance |
| Timeline |
| International Fund |
| Small Cap Equity |
International Fund and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Fund and Small Cap
The main advantage of trading using opposite International Fund and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Fund 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.| International Fund vs. Pimco Moditiesplus Strategy | International Fund vs. The Brown Capital | International Fund vs. Goldman Sachs International | International Fund vs. Cohen Steers Real |
| Small Cap vs. Large Cap Growth | Small Cap vs. Lazard International Strategic | Small Cap vs. Equity Income Fund | Small Cap vs. Large Cap E |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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