Correlation Between Global Real and Smallcap Fund
Can any of the company-specific risk be diversified away by investing in both Global Real and Smallcap Fund 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 Global Real and Smallcap Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Real Estate and Smallcap Fund Fka, you can compare the effects of market volatilities on Global Real and Smallcap Fund 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 Global Real with a short position of Smallcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Smallcap Fund.
Diversification Opportunities for Global Real and Smallcap Fund
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Global and Smallcap is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate and Smallcap Fund Fka in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Fund Fka and Global Real 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 Global Real Estate are associated (or correlated) with Smallcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Fund Fka has no effect on the direction of Global Real i.e., Global Real and Smallcap Fund go up and down completely randomly.
Pair Corralation between Global Real and Smallcap Fund
Assuming the 90 days horizon Global Real Estate is expected to under-perform the Smallcap Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Real Estate is 1.69 times less risky than Smallcap Fund. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Smallcap Fund Fka is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,598 in Smallcap Fund Fka on August 28, 2024 and sell it today you would earn a total of 234.00 from holding Smallcap Fund Fka or generate 9.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Real Estate vs. Smallcap Fund Fka
Performance |
| Timeline |
| Global Real Estate |
| Smallcap Fund Fka |
Global Real and Smallcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Real and Smallcap Fund
The main advantage of trading using opposite Global Real and Smallcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real position performs unexpectedly, Smallcap Fund 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 Fund will offset losses from the drop in Smallcap Fund's long position.| Global Real vs. Real Estate Securities | Global Real vs. International Emerging Markets | Global Real vs. Midcap Fund Class | Global Real vs. Global Diversified Income |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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