Correlation Between Smallcap Growth and Rational Defensive
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Rational Defensive 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 Rational Defensive 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 Rational Defensive Growth, you can compare the effects of market volatilities on Smallcap Growth and Rational Defensive 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 Rational Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Rational Defensive.
Diversification Opportunities for Smallcap Growth and Rational Defensive
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Smallcap and Rational is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Rational Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Defensive Growth 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 Rational Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Defensive Growth has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Rational Defensive go up and down completely randomly.
Pair Corralation between Smallcap Growth and Rational Defensive
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 1.55 times more return on investment than Rational Defensive. However, Smallcap Growth is 1.55 times more volatile than Rational Defensive Growth. It trades about 0.2 of its potential returns per unit of risk. Rational Defensive Growth is currently generating about 0.17 per unit of risk. If you would invest 1,605 in Smallcap Growth Fund on August 28, 2024 and sell it today you would earn a total of 102.00 from holding Smallcap Growth Fund or generate 6.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap Growth Fund vs. Rational Defensive Growth
Performance |
| Timeline |
| Smallcap Growth |
| Rational Defensive Growth |
Smallcap Growth and Rational Defensive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Rational Defensive
The main advantage of trading using opposite Smallcap Growth and Rational Defensive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Rational Defensive 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 Rational Defensive will offset losses from the drop in Rational Defensive's long position.| Smallcap Growth vs. Ultra Short Term Fixed | Smallcap Growth vs. Nuveen Short Term | Smallcap Growth vs. Quantitative Longshort Equity | Smallcap Growth vs. Siit Ultra Short |
| Rational Defensive vs. Rational Dynamic Momentum | Rational Defensive vs. Rational Dynamic Momentum | Rational Defensive vs. Rational Dynamic Momentum | Rational Defensive vs. Rational Special Situations |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |