Correlation Between Small-cap Value and Large Cap
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Large 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 Value and Large 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 Series and Large Cap Growth Profund, you can compare the effects of market volatilities on Small-cap Value and Large 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 Value with a short position of Large Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Large Cap.
Diversification Opportunities for Small-cap Value and Large Cap
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small-cap and Large is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Large Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Growth and Small-cap Value 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 Series are associated (or correlated) with Large Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Growth has no effect on the direction of Small-cap Value i.e., Small-cap Value and Large Cap go up and down completely randomly.
Pair Corralation between Small-cap Value and Large Cap
Assuming the 90 days horizon Small Cap Value Series is expected to generate 1.27 times more return on investment than Large Cap. However, Small-cap Value is 1.27 times more volatile than Large Cap Growth Profund. It trades about 0.14 of its potential returns per unit of risk. Large Cap Growth Profund is currently generating about 0.16 per unit of risk. If you would invest 1,667 in Small Cap Value Series on August 31, 2024 and sell it today you would earn a total of 191.00 from holding Small Cap Value Series or generate 11.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Series vs. Large Cap Growth Profund
Performance |
| Timeline |
| Small Cap Value |
| Large Cap Growth |
Small-cap Value and Large Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Large Cap
The main advantage of trading using opposite Small-cap Value and Large Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Large 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 Large Cap will offset losses from the drop in Large Cap's long position.| Small-cap Value vs. Gabelli Convertible And | Small-cap Value vs. Virtus Convertible | Small-cap Value vs. Rationalpier 88 Convertible | Small-cap Value vs. Fidelity Sai Convertible |
| Large Cap vs. Mutual Of America | Large Cap vs. Vanguard Small Cap Value | Large Cap vs. Mid Cap Value Profund | Large Cap vs. Heartland Value Plus |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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