Correlation Between Smallcap Growth and Small Cap
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Small Cap 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 Small Cap 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 Small Cap Special, you can compare the effects of market volatilities on Smallcap Growth and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Small Cap.
Diversification Opportunities for Smallcap Growth and Small Cap
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Smallcap and Small is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Small Cap Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Special 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Special has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Small Cap go up and down completely randomly.
Pair Corralation between Smallcap Growth and Small Cap
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 1.5 times more return on investment than Small Cap. However, Smallcap Growth is 1.5 times more volatile than Small Cap Special. It trades about -0.08 of its potential returns per unit of risk. Small Cap Special is currently generating about -0.13 per unit of risk. If you would invest 1,729 in Smallcap Growth Fund on September 12, 2024 and sell it today you would lose (33.00) from holding Smallcap Growth Fund or give up 1.91% 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. Small Cap Special
Performance |
| Timeline |
| Smallcap Growth |
| Small Cap Special |
Smallcap Growth and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Small Cap
The main advantage of trading using opposite Smallcap Growth and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap'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 |
| Small Cap vs. Artisan Small Cap | Small Cap vs. Smallcap Growth Fund | Small Cap vs. Needham Aggressive Growth | Small Cap vs. Ftfa Franklin Templeton 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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