Correlation Between Blue Chip and Smallcap Growth
Can any of the company-specific risk be diversified away by investing in both Blue Chip and Smallcap Growth 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 Blue Chip and Smallcap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Chip Fund and Smallcap Growth Fund, you can compare the effects of market volatilities on Blue Chip and Smallcap Growth 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 Blue Chip with a short position of Smallcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Chip and Smallcap Growth.
Diversification Opportunities for Blue Chip and Smallcap Growth
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Blue and Smallcap is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Blue Chip Fund and Smallcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Growth and Blue Chip 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 Blue Chip Fund are associated (or correlated) with Smallcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Growth has no effect on the direction of Blue Chip i.e., Blue Chip and Smallcap Growth go up and down completely randomly.
Pair Corralation between Blue Chip and Smallcap Growth
Assuming the 90 days horizon Blue Chip Fund is expected to generate 0.81 times more return on investment than Smallcap Growth. However, Blue Chip Fund is 1.23 times less risky than Smallcap Growth. It trades about -0.15 of its potential returns per unit of risk. Smallcap Growth Fund is currently generating about -0.13 per unit of risk. If you would invest 4,504 in Blue Chip Fund on December 31, 2024 and sell it today you would lose (196.00) from holding Blue Chip Fund or give up 4.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Chip Fund vs. Smallcap Growth Fund
Performance |
| Timeline |
| Blue Chip Fund |
| Smallcap Growth |
Blue Chip and Smallcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Chip and Smallcap Growth
The main advantage of trading using opposite Blue Chip and Smallcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Chip position performs unexpectedly, Smallcap Growth 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 Smallcap Growth will offset losses from the drop in Smallcap Growth's long position.| Blue Chip vs. Angel Oak Ultrashort | Blue Chip vs. Siit Ultra Short | Blue Chip vs. Federated Municipal Ultrashort | Blue Chip vs. Vanguard Ultra Short Term Bond |
| Smallcap Growth vs. Short Term Government Fund | Smallcap Growth vs. Fundvantage Trust | Smallcap Growth vs. Morgan Stanley Institutional | Smallcap Growth vs. Sei Daily Income |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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