Correlation Between Smallcap Growth and Income Fund
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Income 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 Smallcap Growth and Income Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Growth Fund and Income Fund Class, you can compare the effects of market volatilities on Smallcap Growth and Income 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 Smallcap Growth with a short position of Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Income Fund.
Diversification Opportunities for Smallcap Growth and Income Fund
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Smallcap and Income is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Income Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Class and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Class has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Income Fund go up and down completely randomly.
Pair Corralation between Smallcap Growth and Income Fund
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 4.03 times more return on investment than Income Fund. However, Smallcap Growth is 4.03 times more volatile than Income Fund Class. It trades about 0.27 of its potential returns per unit of risk. Income Fund Class is currently generating about 0.11 per unit of risk. If you would invest 1,593 in Smallcap Growth Fund on September 4, 2024 and sell it today you would earn a total of 135.00 from holding Smallcap Growth Fund or generate 8.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 95.24% |
Values | Daily Returns |
Smallcap Growth Fund vs. Income Fund Class
Performance |
Timeline |
Smallcap Growth |
Income Fund Class |
Smallcap Growth and Income Fund Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Smallcap Growth and Income Fund
The main advantage of trading using opposite Smallcap Growth and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Income 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 Income Fund will offset losses from the drop in Income Fund's long position.Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management |
Income Fund vs. Strategic Asset Management | Income Fund vs. Strategic Asset Management | Income Fund vs. Strategic Asset Management | Income Fund vs. Strategic Asset Management |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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