Correlation Between Smallcap World and Income Fund
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Income 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 Income 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 Income Fund Of, you can compare the effects of market volatilities on Smallcap World and Income 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 Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Income Fund.
Diversification Opportunities for Smallcap World and Income Fund
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Smallcap and Income is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Income Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund has no effect on the direction of Smallcap World i.e., Smallcap World and Income Fund go up and down completely randomly.
Pair Corralation between Smallcap World and Income Fund
Assuming the 90 days horizon Smallcap World Fund is expected to under-perform the Income Fund. In addition to that, Smallcap World is 2.04 times more volatile than Income Fund Of. It trades about -0.27 of its total potential returns per unit of risk. Income Fund Of is currently generating about 0.21 per unit of volatility. If you would invest 2,529 in Income Fund Of on December 1, 2024 and sell it today you would earn a total of 46.00 from holding Income Fund Of or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Smallcap World Fund vs. Income Fund Of
Performance |
| Timeline |
| Smallcap World |
| Income Fund |
Smallcap World and Income Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Income Fund
The main advantage of trading using opposite Smallcap World and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Income 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 Income Fund will offset losses from the drop in Income Fund's long position.| Smallcap World vs. Mirova Global Green | Smallcap World vs. Ab Global Bond | Smallcap World vs. Ms Global Fixed | Smallcap World vs. Dreyfusstandish Global Fixed |
| Income Fund vs. Capital Income Builder | Income Fund vs. Capital World Growth | Income Fund vs. American Balanced | Income Fund vs. American Funds Fundamental |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |