Correlation Between Small Cap and Amcap Fund
Can any of the company-specific risk be diversified away by investing in both Small Cap and Amcap Fund 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 Amcap Fund 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 Amcap Fund Class, you can compare the effects of market volatilities on Small Cap and Amcap Fund 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 Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Amcap Fund.
Diversification Opportunities for Small Cap and Amcap Fund
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Amcap is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class 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 Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of Small Cap i.e., Small Cap and Amcap Fund go up and down completely randomly.
Pair Corralation between Small Cap and Amcap Fund
Assuming the 90 days horizon Small Cap Equity is expected to generate 1.94 times more return on investment than Amcap Fund. However, Small Cap is 1.94 times more volatile than Amcap Fund Class. It trades about 0.28 of its potential returns per unit of risk. Amcap Fund Class is currently generating about 0.27 per unit of risk. If you would invest 1,852 in Small Cap Equity on September 3, 2024 and sell it today you would earn a total of 179.00 from holding Small Cap Equity or generate 9.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Equity vs. Amcap Fund Class
Performance |
| Timeline |
| Small Cap Equity |
| Amcap Fund Class |
Small Cap and Amcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Amcap Fund
The main advantage of trading using opposite Small Cap and Amcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Amcap Fund 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 Amcap Fund will offset losses from the drop in Amcap Fund's long position.| Small Cap vs. Semiconductor Ultrasector Profund | Small Cap vs. Qs Large Cap | Small Cap vs. Fm Investments Large | Small Cap vs. T Rowe Price |
| Amcap Fund vs. American Funds The | Amcap Fund vs. American Funds The | Amcap Fund vs. Growth Fund Of | Amcap Fund vs. Growth Fund Of |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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