Correlation Between Small-cap Growth and Small-cap Value
Can any of the company-specific risk be diversified away by investing in both Small-cap Growth 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 Small-cap Growth 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 Small Cap Growth Profund and Small Cap Value Profund, you can compare the effects of market volatilities on Small-cap Growth 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 Small-cap Growth with a short position of Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Growth and Small-cap Value.
Diversification Opportunities for Small-cap Growth and Small-cap Value
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small-cap and Small-cap is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth Profund and Small Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Small-cap Growth 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 Growth Profund 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 Small-cap Growth i.e., Small-cap Growth and Small-cap Value go up and down completely randomly.
Pair Corralation between Small-cap Growth and Small-cap Value
Assuming the 90 days horizon Small-cap Growth is expected to generate 1.05 times less return on investment than Small-cap Value. But when comparing it to its historical volatility, Small Cap Growth Profund is 1.02 times less risky than Small-cap Value. It trades about 0.26 of its potential returns per unit of risk. Small Cap Value Profund is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 10,977 in Small Cap Value Profund on August 28, 2024 and sell it today you would earn a total of 1,049 from holding Small Cap Value Profund or generate 9.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Growth Profund vs. Small Cap Value Profund
Performance |
| Timeline |
| Small Cap Growth |
| Small Cap Value |
Small-cap Growth and Small-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Growth and Small-cap Value
The main advantage of trading using opposite Small-cap Growth and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Growth 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.| Small-cap Growth vs. Small Cap Value Profund | Small-cap Growth vs. Mid Cap Growth Profund | Small-cap Growth vs. Mid Cap Value Profund | Small-cap Growth vs. Small Cap Profund Small Cap |
| Small-cap Value vs. Evaluator Conservative Rms | Small-cap Value vs. American Funds Conservative | Small-cap Value vs. Pgim Conservative Retirement | Small-cap Value vs. Fidelity Advisor Diversified |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |