Correlation Between Smallcap Growth and Smallcap Value
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Smallcap Value 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 Smallcap Value 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 Smallcap Value Fund, you can compare the effects of market volatilities on Smallcap Growth and Smallcap Value 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 Smallcap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Smallcap Value.
Diversification Opportunities for Smallcap Growth and Smallcap Value
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Smallcap and Smallcap is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Smallcap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Value 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 Smallcap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Value has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Smallcap Value go up and down completely randomly.
Pair Corralation between Smallcap Growth and Smallcap Value
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 0.96 times more return on investment than Smallcap Value. However, Smallcap Growth Fund is 1.04 times less risky than Smallcap Value. It trades about 0.07 of its potential returns per unit of risk. Smallcap Value Fund is currently generating about 0.05 per unit of risk. If you would invest 1,229 in Smallcap Growth Fund on August 31, 2024 and sell it today you would earn a total of 490.00 from holding Smallcap Growth Fund or generate 39.87% 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. Smallcap Value Fund
Performance |
| Timeline |
| Smallcap Growth |
| Smallcap Value |
Smallcap Growth and Smallcap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Smallcap Value
The main advantage of trading using opposite Smallcap Growth and Smallcap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Smallcap Value 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 Smallcap Value will offset losses from the drop in Smallcap Value's long position.| Smallcap Growth vs. Western Asset Inflation | Smallcap Growth vs. American Funds Inflation | Smallcap Growth vs. Blackrock Inflation Protected | Smallcap Growth vs. Fidelity Advisor 529 |
| Smallcap Value vs. Federated Institutional High | Smallcap Value vs. Ab Global Risk | Smallcap Value vs. Needham Aggressive Growth | Smallcap Value vs. California High Yield Municipal |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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