Correlation Between Smallcap Growth and Power Momentum
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Power Momentum 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 Power Momentum 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 Power Momentum Index, you can compare the effects of market volatilities on Smallcap Growth and Power Momentum 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 Power Momentum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Power Momentum.
Diversification Opportunities for Smallcap Growth and Power Momentum
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Smallcap and Power is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Power Momentum Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Momentum Index 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 Power Momentum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Momentum Index has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Power Momentum go up and down completely randomly.
Pair Corralation between Smallcap Growth and Power Momentum
Assuming the 90 days horizon Smallcap Growth Fund is expected to under-perform the Power Momentum. In addition to that, Smallcap Growth is 1.45 times more volatile than Power Momentum Index. It trades about -0.08 of its total potential returns per unit of risk. Power Momentum Index is currently generating about -0.03 per unit of volatility. If you would invest 1,528 in Power Momentum Index on September 12, 2024 and sell it today you would lose (8.00) from holding Power Momentum Index or give up 0.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap Growth Fund vs. Power Momentum Index
Performance |
| Timeline |
| Smallcap Growth |
| Power Momentum Index |
Smallcap Growth and Power Momentum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Power Momentum
The main advantage of trading using opposite Smallcap Growth and Power Momentum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Power Momentum 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 Power Momentum will offset losses from the drop in Power Momentum's long position.| Smallcap Growth vs. Allianzgi Diversified Income | Smallcap Growth vs. Global Diversified Income | Smallcap Growth vs. Aqr Diversified Arbitrage | Smallcap Growth vs. Guggenheim Diversified Income |
| Power Momentum vs. Mid Cap Growth | Power Momentum vs. Smallcap Growth Fund | Power Momentum vs. T Rowe Price | Power Momentum vs. Tfa Alphagen Growth |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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