Correlation Between Small Cap and Global Real
Can any of the company-specific risk be diversified away by investing in both Small Cap and Global Real 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 Small Cap and Global Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and Global Real Estate, you can compare the effects of market volatilities on Small Cap and Global Real 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 Small Cap with a short position of Global Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Global Real.
Diversification Opportunities for Small Cap and Global Real
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Global is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Global Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Real Estate and Small Cap 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 Small Cap Core are associated (or correlated) with Global Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Real Estate has no effect on the direction of Small Cap i.e., Small Cap and Global Real go up and down completely randomly.
Pair Corralation between Small Cap and Global Real
Assuming the 90 days horizon Small Cap Core is expected to generate 1.27 times more return on investment than Global Real. However, Small Cap is 1.27 times more volatile than Global Real Estate. It trades about 0.06 of its potential returns per unit of risk. Global Real Estate is currently generating about 0.04 per unit of risk. If you would invest 1,074 in Small Cap Core on August 28, 2024 and sell it today you would earn a total of 412.00 from holding Small Cap Core or generate 38.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Core vs. Global Real Estate
Performance |
| Timeline |
| Small Cap Core |
| Global Real Estate |
Small Cap and Global Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Global Real
The main advantage of trading using opposite Small Cap and Global Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Global Real 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 Global Real will offset losses from the drop in Global Real's long position.| Small Cap vs. Pro Blend Moderate Term | Small Cap vs. Hartford Moderate Allocation | Small Cap vs. Qs Moderate Growth | Small Cap vs. Dimensional Retirement Income |
| Global Real vs. Mid Cap Index | Global Real vs. Mid Cap Strategic | Global Real vs. Valic Company I | Global Real vs. Valic Company I |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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