Correlation Between Small-company Stock and Value Fund
Can any of the company-specific risk be diversified away by investing in both Small-company Stock and Value 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-company Stock and Value Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Company Stock Fund and Value Fund Value, you can compare the effects of market volatilities on Small-company Stock and Value 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-company Stock with a short position of Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-company Stock and Value Fund.
Diversification Opportunities for Small-company Stock and Value Fund
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small-company and Value is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Small Company Stock Fund and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value and Small-company Stock 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 Company Stock Fund are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Small-company Stock i.e., Small-company Stock and Value Fund go up and down completely randomly.
Pair Corralation between Small-company Stock and Value Fund
Assuming the 90 days horizon Small Company Stock Fund is expected to generate 1.87 times more return on investment than Value Fund. However, Small-company Stock is 1.87 times more volatile than Value Fund Value. It trades about 0.14 of its potential returns per unit of risk. Value Fund Value is currently generating about 0.15 per unit of risk. If you would invest 2,670 in Small Company Stock Fund on August 28, 2024 and sell it today you would earn a total of 309.00 from holding Small Company Stock Fund or generate 11.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Company Stock Fund vs. Value Fund Value
Performance |
| Timeline |
| Small-company Stock |
| Value Fund Value |
Small-company Stock and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-company Stock and Value Fund
The main advantage of trading using opposite Small-company Stock and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-company Stock position performs unexpectedly, Value 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 Value Fund will offset losses from the drop in Value Fund's long position.| Small-company Stock vs. The Gold Bullion | Small-company Stock vs. Oppenheimer Gold Special | Small-company Stock vs. Gold And Precious | Small-company Stock vs. Global Gold Fund |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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