Correlation Between Small Cap and Omni Small-cap
Can any of the company-specific risk be diversified away by investing in both Small Cap and Omni 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 Small Cap and Omni Small-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value and Omni Small Cap Value, you can compare the effects of market volatilities on Small Cap and Omni 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 Small Cap with a short position of Omni Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Omni Small-cap.
Diversification Opportunities for Small Cap and Omni Small-cap
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between SMALL and Omni is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Omni Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omni Small Cap 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 Value are associated (or correlated) with Omni 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 Omni Small Cap has no effect on the direction of Small Cap i.e., Small Cap and Omni Small-cap go up and down completely randomly.
Pair Corralation between Small Cap and Omni Small-cap
Assuming the 90 days horizon Small Cap is expected to generate 1.11 times less return on investment than Omni Small-cap. But when comparing it to its historical volatility, Small Cap Value is 1.24 times less risky than Omni Small-cap. It trades about 0.1 of its potential returns per unit of risk. Omni Small Cap Value is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,510 in Omni Small Cap Value on August 25, 2024 and sell it today you would earn a total of 624.00 from holding Omni Small Cap Value or generate 41.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value vs. Omni Small Cap Value
Performance |
| Timeline |
| Small Cap Value |
| Omni Small Cap |
Small Cap and Omni Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Omni Small-cap
The main advantage of trading using opposite Small Cap and Omni Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Omni 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 Omni Small-cap will offset losses from the drop in Omni Small-cap's long position.| Small Cap vs. Regional Bank Fund | Small Cap vs. Regional Bank Fund | Small Cap vs. Multimanager Lifestyle Moderate | Small Cap vs. Multimanager Lifestyle Balanced |
| Omni Small-cap vs. Aggressive Investors 1 | Omni Small-cap vs. Managed Volatility Fund | Omni Small-cap vs. Small Cap Value Fund | Omni Small-cap vs. Ultra Small Pany Fund |
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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