Correlation Between Small Cap and Elfun Government
Can any of the company-specific risk be diversified away by investing in both Small Cap and Elfun Government 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 Small Cap and Elfun Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Equity and Elfun Government Money, you can compare the effects of market volatilities on Small Cap and Elfun Government 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 Small Cap with a short position of Elfun Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Elfun Government.
Diversification Opportunities for Small Cap and Elfun Government
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Small and Elfun is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Elfun Government Money in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elfun Government Money and Small Cap 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 Small Cap Equity are associated (or correlated) with Elfun Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elfun Government Money has no effect on the direction of Small Cap i.e., Small Cap and Elfun Government go up and down completely randomly.
Pair Corralation between Small Cap and Elfun Government
Assuming the 90 days horizon Small Cap is expected to generate 34.33 times less return on investment than Elfun Government. But when comparing it to its historical volatility, Small Cap Equity is 25.0 times less risky than Elfun Government. It trades about 0.05 of its potential returns per unit of risk. Elfun Government Money is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 366.00 in Elfun Government Money on September 12, 2024 and sell it today you would lose (266.00) from holding Elfun Government Money or give up 72.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 97.82% |
| Values | Daily Returns |
Small Cap Equity vs. Elfun Government Money
Performance |
| Timeline |
| Small Cap Equity |
| Elfun Government Money |
Small Cap and Elfun Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Elfun Government
The main advantage of trading using opposite Small Cap and Elfun Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Elfun Government 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 Elfun Government will offset losses from the drop in Elfun Government's long position.| Small Cap vs. Elfun Government Money | Small Cap vs. General Money Market | Small Cap vs. Ubs Money Series | Small Cap vs. Schwab Treasury Money |
| Elfun Government vs. Vanguard Total Stock | Elfun Government vs. Vanguard 500 Index | Elfun Government vs. Vanguard Total Stock | Elfun Government vs. Vanguard Total Stock |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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