Correlation Between Inverse Emerging and Small-cap Value
Can any of the company-specific risk be diversified away by investing in both Inverse Emerging and Small-cap Value 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 Inverse Emerging and Small-cap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Emerging Markets and Small Cap Value Fund, you can compare the effects of market volatilities on Inverse Emerging and Small-cap Value 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 Inverse Emerging with a short position of Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Emerging and Small-cap Value.
Diversification Opportunities for Inverse Emerging and Small-cap Value
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Inverse and Small-cap is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Emerging Markets and Small Cap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Inverse Emerging 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 Inverse Emerging Markets are associated (or correlated) with Small-cap Value. 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 Inverse Emerging i.e., Inverse Emerging and Small-cap Value go up and down completely randomly.
Pair Corralation between Inverse Emerging and Small-cap Value
Assuming the 90 days horizon Inverse Emerging Markets is expected to under-perform the Small-cap Value. In addition to that, Inverse Emerging is 2.23 times more volatile than Small Cap Value Fund. It trades about -0.1 of its total potential returns per unit of risk. Small Cap Value Fund is currently generating about 0.15 per unit of volatility. If you would invest 3,718 in Small Cap Value Fund on October 29, 2024 and sell it today you would earn a total of 111.00 from holding Small Cap Value Fund or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Emerging Markets vs. Small Cap Value Fund
Performance |
| Timeline |
| Inverse Emerging Markets |
| Small Cap Value |
Inverse Emerging and Small-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Emerging and Small-cap Value
The main advantage of trading using opposite Inverse Emerging and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Emerging position performs unexpectedly, Small-cap Value 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 Value will offset losses from the drop in Small-cap Value's long position.| Inverse Emerging vs. Nuveen Missouri Municipal | Inverse Emerging vs. Franklin Adjustable Government | Inverse Emerging vs. T Rowe Price | Inverse Emerging vs. Old Westbury Municipal |
| Small-cap Value vs. Federated Ohio Municipal | Small-cap Value vs. Franklin Government Money | Small-cap Value vs. Transamerica Intermediate Muni | Small-cap Value vs. Artisan High Income |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets |