Correlation Between Smallcap Value and Smallcap Growth
Can any of the company-specific risk be diversified away by investing in both Smallcap Value and Smallcap Growth 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 Value and Smallcap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Value Fund and Smallcap Growth Fund, you can compare the effects of market volatilities on Smallcap Value and Smallcap Growth 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 Value with a short position of Smallcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Value and Smallcap Growth.
Diversification Opportunities for Smallcap Value and Smallcap Growth
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 Value Fund and Smallcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Growth and Smallcap Value 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 Value Fund are associated (or correlated) with Smallcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Growth has no effect on the direction of Smallcap Value i.e., Smallcap Value and Smallcap Growth go up and down completely randomly.
Pair Corralation between Smallcap Value and Smallcap Growth
Assuming the 90 days horizon Smallcap Value is expected to generate 1.44 times less return on investment than Smallcap Growth. In addition to that, Smallcap Value is 1.03 times more volatile than Smallcap Growth Fund. It trades about 0.07 of its total potential returns per unit of risk. Smallcap Growth Fund is currently generating about 0.1 per unit of volatility. If you would invest 1,169 in Smallcap Growth Fund on September 2, 2024 and sell it today you would earn a total of 374.00 from holding Smallcap Growth Fund or generate 31.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap Value Fund vs. Smallcap Growth Fund
Performance |
| Timeline |
| Smallcap Value |
| Smallcap Growth |
Smallcap Value and Smallcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Value and Smallcap Growth
The main advantage of trading using opposite Smallcap Value and Smallcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Value position performs unexpectedly, Smallcap Growth 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 Growth will offset losses from the drop in Smallcap Growth's long position.| Smallcap Value vs. Strategic Asset Management | Smallcap Value vs. Strategic Asset Management | Smallcap Value vs. Strategic Asset Management | Smallcap Value vs. Strategic Asset Management |
| Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management | Smallcap Growth 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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