Correlation Between Smallcap Growth and Largecap
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Largecap 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 Largecap 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 Largecap Sp 500, you can compare the effects of market volatilities on Smallcap Growth and Largecap 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 Largecap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Largecap.
Diversification Opportunities for Smallcap Growth and Largecap
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Smallcap and Largecap is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Largecap Sp 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Largecap Sp 500 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 Largecap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Largecap Sp 500 has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Largecap go up and down completely randomly.
Pair Corralation between Smallcap Growth and Largecap
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 1.77 times more return on investment than Largecap. However, Smallcap Growth is 1.77 times more volatile than Largecap Sp 500. It trades about 0.2 of its potential returns per unit of risk. Largecap Sp 500 is currently generating about 0.16 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. Largecap Sp 500
Performance |
| Timeline |
| Smallcap Growth |
| Largecap Sp 500 |
Smallcap Growth and Largecap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Largecap
The main advantage of trading using opposite Smallcap Growth and Largecap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Largecap 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 Largecap will offset losses from the drop in Largecap's long position.| Smallcap Growth vs. Small Pany Growth | Smallcap Growth vs. Crafword Dividend Growth | Smallcap Growth vs. Mid Cap Growth | Smallcap Growth vs. L Abbett Growth |
| Largecap vs. Strategic Asset Management | Largecap vs. Strategic Asset Management | Largecap vs. Strategic Asset Management | Largecap 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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