Correlation Between Multifactor Equity and Us Small
Can any of the company-specific risk be diversified away by investing in both Multifactor Equity and Us Small 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 Multifactor Equity and Us Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multifactor Equity Fund and Us Small Cap, you can compare the effects of market volatilities on Multifactor Equity and Us Small 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 Multifactor Equity with a short position of Us Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multifactor Equity and Us Small.
Diversification Opportunities for Multifactor Equity and Us Small
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Multifactor and REBYX is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Multifactor Equity Fund and Us Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Small Cap and Multifactor Equity 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 Multifactor Equity Fund are associated (or correlated) with Us Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Small Cap has no effect on the direction of Multifactor Equity i.e., Multifactor Equity and Us Small go up and down completely randomly.
Pair Corralation between Multifactor Equity and Us Small
Assuming the 90 days horizon Multifactor Equity is expected to generate 1.59 times less return on investment than Us Small. But when comparing it to its historical volatility, Multifactor Equity Fund is 2.0 times less risky than Us Small. It trades about 0.38 of its potential returns per unit of risk. Us Small Cap is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,842 in Us Small Cap on September 1, 2024 and sell it today you would earn a total of 292.00 from holding Us Small Cap or generate 10.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Multifactor Equity Fund vs. Us Small Cap
Performance |
| Timeline |
| Multifactor Equity |
| Us Small Cap |
Multifactor Equity and Us Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multifactor Equity and Us Small
The main advantage of trading using opposite Multifactor Equity and Us Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multifactor Equity position performs unexpectedly, Us Small 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 Us Small will offset losses from the drop in Us Small's long position.| Multifactor Equity vs. Mesirow Financial Small | Multifactor Equity vs. Prudential Jennison Financial | Multifactor Equity vs. Vanguard Financials Index | Multifactor Equity vs. Fidelity Advisor Financial |
| Us Small vs. Vanguard Small Cap Index | Us Small vs. T Rowe Price | Us Small vs. HUMANA INC | Us Small vs. SCOR PK |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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