Correlation Between Smallcap Growth and Equity Income
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Equity Income 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 Equity Income 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 Equity Income Fund, you can compare the effects of market volatilities on Smallcap Growth and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Equity Income.
Diversification Opportunities for Smallcap Growth and Equity Income
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Smallcap and Equity is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Equity Income go up and down completely randomly.
Pair Corralation between Smallcap Growth and Equity Income
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 1.86 times more return on investment than Equity Income. However, Smallcap Growth is 1.86 times more volatile than Equity Income Fund. It trades about 0.11 of its potential returns per unit of risk. Equity Income Fund is currently generating about 0.16 per unit of risk. If you would invest 1,474 in Smallcap Growth Fund on September 3, 2024 and sell it today you would earn a total of 254.00 from holding Smallcap Growth Fund or generate 17.23% 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. Equity Income Fund
Performance |
| Timeline |
| Smallcap Growth |
| Equity Income |
Smallcap Growth and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Equity Income
The main advantage of trading using opposite Smallcap Growth and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.| Smallcap Growth vs. Goldman Sachs Real | Smallcap Growth vs. Vanguard Reit Index | Smallcap Growth vs. Deutsche Real Estate | Smallcap Growth vs. Amg Managers Centersquare |
| Equity Income vs. Champlain Mid Cap | Equity Income vs. Franklin Growth Opportunities | Equity Income vs. Pace Smallmedium Growth | Equity Income vs. T Rowe Price |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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