Correlation Between Smallcap World and Shelton Emerging
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Shelton Emerging 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 Shelton Emerging 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 Shelton Emerging Markets, you can compare the effects of market volatilities on Smallcap World and Shelton Emerging 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 Shelton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Shelton Emerging.
Diversification Opportunities for Smallcap World and Shelton Emerging
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SMALLCAP and Shelton is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Shelton Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shelton Emerging Markets 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 Shelton Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shelton Emerging Markets has no effect on the direction of Smallcap World i.e., Smallcap World and Shelton Emerging go up and down completely randomly.
Pair Corralation between Smallcap World and Shelton Emerging
Assuming the 90 days horizon Smallcap World Fund is expected to generate 0.89 times more return on investment than Shelton Emerging. However, Smallcap World Fund is 1.12 times less risky than Shelton Emerging. It trades about 0.23 of its potential returns per unit of risk. Shelton Emerging Markets is currently generating about -0.27 per unit of risk. If you would invest 7,109 in Smallcap World Fund on September 3, 2024 and sell it today you would earn a total of 290.00 from holding Smallcap World Fund or generate 4.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Shelton Emerging Markets
Performance |
| Timeline |
| Smallcap World |
| Shelton Emerging Markets |
Smallcap World and Shelton Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Shelton Emerging
The main advantage of trading using opposite Smallcap World and Shelton Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Shelton Emerging 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 Shelton Emerging will offset losses from the drop in Shelton Emerging's long position.| Smallcap World vs. Shelton Emerging Markets | Smallcap World vs. Nasdaq 100 2x Strategy | Smallcap World vs. Mondrian Emerging Markets | Smallcap World vs. Arrow Managed Futures |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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