Correlation Between Smallcap World and Global Small
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Global 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 Smallcap World and Global Small 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 Global Small, you can compare the effects of market volatilities on Smallcap World and Global 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 Smallcap World with a short position of Global Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Global Small.
Diversification Opportunities for Smallcap World and Global Small
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smallcap and Global is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Global Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Small 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 Global Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Small has no effect on the direction of Smallcap World i.e., Smallcap World and Global Small go up and down completely randomly.
Pair Corralation between Smallcap World and Global Small
Assuming the 90 days horizon Smallcap World Fund is expected to generate 1.2 times more return on investment than Global Small. However, Smallcap World is 1.2 times more volatile than Global Small. It trades about -0.01 of its potential returns per unit of risk. Global Small is currently generating about -0.02 per unit of risk. If you would invest 7,052 in Smallcap World Fund on September 12, 2024 and sell it today you would lose (20.00) from holding Smallcap World Fund or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Smallcap World Fund vs. Global Small
Performance |
| Timeline |
| Smallcap World |
| Global Small |
Smallcap World and Global Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Global Small
The main advantage of trading using opposite Smallcap World and Global Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Global 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 Global Small will offset losses from the drop in Global Small'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 |
| Global Small vs. Hennessy Bp Energy | Global Small vs. Goehring Rozencwajg Resources | Global Small vs. Icon Natural Resources | Global Small vs. Calvert Global Energy |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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