Correlation Between Smallcap World and Growth Fund
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Growth 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 Smallcap World and Growth Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Growth Fund Of, you can compare the effects of market volatilities on Smallcap World and Growth 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 Smallcap World with a short position of Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Growth Fund.
Diversification Opportunities for Smallcap World and Growth Fund
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SMALLCAP and Growth is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Growth Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund and Smallcap World 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 World Fund are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund has no effect on the direction of Smallcap World i.e., Smallcap World and Growth Fund go up and down completely randomly.
Pair Corralation between Smallcap World and Growth Fund
Assuming the 90 days horizon Smallcap World is expected to generate 2.1 times less return on investment than Growth Fund. But when comparing it to its historical volatility, Smallcap World Fund is 1.08 times less risky than Growth Fund. It trades about 0.11 of its potential returns per unit of risk. Growth Fund Of is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 7,198 in Growth Fund Of on September 2, 2024 and sell it today you would earn a total of 902.00 from holding Growth Fund Of or generate 12.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Growth Fund Of
Performance |
| Timeline |
| Smallcap World |
| Growth Fund |
Smallcap World and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Growth Fund
The main advantage of trading using opposite Smallcap World and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Growth 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 Growth Fund will offset losses from the drop in Growth Fund's long position.| Smallcap World vs. Ab Small Cap | Smallcap World vs. Vanguard Growth And | Smallcap World vs. Nationwide Growth Fund | Smallcap World vs. T Rowe Price |
| Growth Fund vs. Pnc Emerging Markets | Growth Fund vs. Eagle Mlp Strategy | Growth Fund vs. Goldman Sachs Emerging | Growth Fund vs. Shelton Emerging Markets |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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