Correlation Between Smallcap World and Amcap Fund
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Amcap 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 Amcap 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 Amcap Fund Class, you can compare the effects of market volatilities on Smallcap World and Amcap 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 Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Amcap Fund.
Diversification Opportunities for Smallcap World and Amcap Fund
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smallcap and Amcap is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class 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 Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of Smallcap World i.e., Smallcap World and Amcap Fund go up and down completely randomly.
Pair Corralation between Smallcap World and Amcap Fund
Assuming the 90 days horizon Smallcap World Fund is expected to generate 0.93 times more return on investment than Amcap Fund. However, Smallcap World Fund is 1.07 times less risky than Amcap Fund. It trades about 0.13 of its potential returns per unit of risk. Amcap Fund Class is currently generating about 0.12 per unit of risk. If you would invest 6,943 in Smallcap World Fund on September 13, 2024 and sell it today you would earn a total of 132.00 from holding Smallcap World Fund or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Amcap Fund Class
Performance |
| Timeline |
| Smallcap World |
| Amcap Fund Class |
Smallcap World and Amcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Amcap Fund
The main advantage of trading using opposite Smallcap World and Amcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Amcap 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 Amcap Fund will offset losses from the drop in Amcap Fund's long position.| Smallcap World vs. New World Fund | Smallcap World vs. Washington Mutual Investors | Smallcap World vs. Europacific Growth Fund | Smallcap World vs. New Perspective Fund |
| Amcap Fund vs. Doubleline Yield Opportunities | Amcap Fund vs. The National Tax Free | Amcap Fund vs. Franklin High Yield | Amcap Fund vs. Pace High Yield |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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