Correlation Between Small Cap and Us Global
Can any of the company-specific risk be diversified away by investing in both Small Cap and Us Global 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 Us Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Growth and Us Global Leaders, you can compare the effects of market volatilities on Small Cap and Us Global 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 Us Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Us Global.
Diversification Opportunities for Small Cap and Us Global
Almost no diversification
The 3 months correlation between Small and USLIX is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth and Us Global Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Global Leaders 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 Growth are associated (or correlated) with Us Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Global Leaders has no effect on the direction of Small Cap i.e., Small Cap and Us Global go up and down completely randomly.
Pair Corralation between Small Cap and Us Global
Assuming the 90 days horizon Small Cap Growth is expected to generate 1.66 times more return on investment than Us Global. However, Small Cap is 1.66 times more volatile than Us Global Leaders. It trades about 0.19 of its potential returns per unit of risk. Us Global Leaders is currently generating about 0.15 per unit of risk. If you would invest 1,751 in Small Cap Growth on August 30, 2024 and sell it today you would earn a total of 118.00 from holding Small Cap Growth or generate 6.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Small Cap Growth vs. Us Global Leaders
Performance |
| Timeline |
| Small Cap Growth |
| Us Global Leaders |
Small Cap and Us Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Us Global
The main advantage of trading using opposite Small Cap and Us Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Us Global 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 Us Global will offset losses from the drop in Us Global's long position.| Small Cap vs. Goldman Sachs High | Small Cap vs. Ab Global Risk | Small Cap vs. Pace High Yield | Small Cap vs. Multimanager Lifestyle Aggressive |
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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