Correlation Between Rmb Fund and Small Cap
Can any of the company-specific risk be diversified away by investing in both Rmb Fund 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 Rmb Fund and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rmb Fund I and Small Cap Value, you can compare the effects of market volatilities on Rmb Fund 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 Rmb Fund with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rmb Fund and Small Cap.
Diversification Opportunities for Rmb Fund and Small Cap
Very poor diversification
The 3 months correlation between Rmb and Small is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Rmb Fund I and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Rmb Fund 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 Rmb Fund I 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 Value has no effect on the direction of Rmb Fund i.e., Rmb Fund and Small Cap go up and down completely randomly.
Pair Corralation between Rmb Fund and Small Cap
Assuming the 90 days horizon Rmb Fund is expected to generate 2.21 times less return on investment than Small Cap. But when comparing it to its historical volatility, Rmb Fund I is 2.03 times less risky than Small Cap. It trades about 0.13 of its potential returns per unit of risk. Small Cap Value is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,066 in Small Cap Value on September 12, 2024 and sell it today you would earn a total of 124.00 from holding Small Cap Value or generate 11.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rmb Fund I vs. Small Cap Value
Performance |
| Timeline |
| Rmb Fund I |
| Small Cap Value |
Rmb Fund and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rmb Fund and Small Cap
The main advantage of trading using opposite Rmb Fund and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rmb Fund 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.| Rmb Fund vs. Absolute Convertible Arbitrage | Rmb Fund vs. Virtus Convertible | Rmb Fund vs. Calamos Dynamic Convertible | Rmb Fund vs. Putnam Convertible Incm Gwth |
| Small Cap vs. Cmg Ultra Short | Small Cap vs. Prudential Short Duration | Small Cap vs. Easterly Snow Longshort | Small Cap vs. Aqr Long Short Equity |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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