Correlation Between Us Strategic and Small Cap
Can any of the company-specific risk be diversified away by investing in both Us Strategic 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 Us Strategic and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Strategic Equity and Small Cap Equity, you can compare the effects of market volatilities on Us Strategic 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 Us Strategic with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Strategic and Small Cap.
Diversification Opportunities for Us Strategic and Small Cap
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between RUSTX and Small is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Us Strategic Equity and Small Cap Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Equity and Us Strategic 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 Us Strategic Equity 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 Equity has no effect on the direction of Us Strategic i.e., Us Strategic and Small Cap go up and down completely randomly.
Pair Corralation between Us Strategic and Small Cap
Assuming the 90 days horizon Us Strategic Equity is expected to generate 0.65 times more return on investment than Small Cap. However, Us Strategic Equity is 1.55 times less risky than Small Cap. It trades about 0.14 of its potential returns per unit of risk. Small Cap Equity is currently generating about 0.08 per unit of risk. If you would invest 1,445 in Us Strategic Equity on September 2, 2024 and sell it today you would earn a total of 446.00 from holding Us Strategic Equity or generate 30.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Strategic Equity vs. Small Cap Equity
Performance |
| Timeline |
| Us Strategic Equity |
| Small Cap Equity |
Us Strategic and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Strategic and Small Cap
The main advantage of trading using opposite Us Strategic and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Strategic 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.| Us Strategic vs. International Developed Markets | Us Strategic vs. Global Real Estate | Us Strategic vs. Global Real Estate | Us Strategic vs. Growth Strategy Fund |
| Small Cap vs. Growth Allocation Fund | Small Cap vs. Defensive Market Strategies | Small Cap vs. Defensive Market Strategies | Small Cap vs. Value Equity Institutional |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |