Correlation Between Smallcap Growth and Smallcap World
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Smallcap World 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 World 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 World Fund, you can compare the effects of market volatilities on Smallcap Growth and Smallcap World 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 World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Smallcap World.
Diversification Opportunities for Smallcap Growth and Smallcap World
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smallcap and Smallcap is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World 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 World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Smallcap World go up and down completely randomly.
Pair Corralation between Smallcap Growth and Smallcap World
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 1.34 times more return on investment than Smallcap World. However, Smallcap Growth is 1.34 times more volatile than Smallcap World Fund. It trades about 0.09 of its potential returns per unit of risk. Smallcap World Fund is currently generating about 0.07 per unit of risk. If you would invest 1,078 in Smallcap Growth Fund on September 2, 2024 and sell it today you would earn a total of 325.00 from holding Smallcap Growth Fund or generate 30.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.79% |
| Values | Daily Returns |
Smallcap Growth Fund vs. Smallcap World Fund
Performance |
| Timeline |
| Smallcap Growth |
| Smallcap World |
Smallcap Growth and Smallcap World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Smallcap World
The main advantage of trading using opposite Smallcap Growth and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Smallcap World 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 World will offset losses from the drop in Smallcap World's long position.| Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management | Smallcap Growth vs. Strategic Asset Management |
| Smallcap World vs. Income Fund Of | Smallcap World vs. New World Fund | Smallcap World vs. American Mutual Fund | Smallcap World vs. American Mutual Fund |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |