Correlation Between Global Real and Smallcap Value
Can any of the company-specific risk be diversified away by investing in both Global Real 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 Global Real and Smallcap Value 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 Value Fund, you can compare the effects of market volatilities on Global Real 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 Global Real with a short position of Smallcap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Smallcap Value.
Diversification Opportunities for Global Real and Smallcap Value
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Global and Smallcap is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate and Smallcap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Value 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 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 Global Real i.e., Global Real and Smallcap Value go up and down completely randomly.
Pair Corralation between Global Real and Smallcap Value
Assuming the 90 days horizon Global Real Estate is expected to under-perform the Smallcap Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Real Estate is 1.81 times less risky than Smallcap Value. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Smallcap Value Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,207 in Smallcap Value Fund on September 3, 2024 and sell it today you would earn a total of 109.00 from holding Smallcap Value Fund or generate 9.03% 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 Value Fund
Performance |
| Timeline |
| Global Real Estate |
| Smallcap Value |
Global Real and Smallcap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Real and Smallcap Value
The main advantage of trading using opposite Global Real and Smallcap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real 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.| Global Real vs. Jhancock Diversified Macro | Global Real vs. Blackrock Sm Cap | Global Real vs. Principal Lifetime Hybrid | Global Real vs. The Gabelli Small |
| Smallcap Value vs. Adams Diversified Equity | Smallcap Value vs. Massmutual Premier Diversified | Smallcap Value vs. Davenport Small Cap | Smallcap Value vs. Fuller Thaler Behavioral |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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