Correlation Between Sp Smallcap and Sp Midcap
Can any of the company-specific risk be diversified away by investing in both Sp Smallcap and Sp Midcap 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 Sp Smallcap and Sp Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sp Smallcap Index and Sp Midcap Index, you can compare the effects of market volatilities on Sp Smallcap and Sp Midcap 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 Sp Smallcap with a short position of Sp Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Sp Midcap.
Diversification Opportunities for Sp Smallcap and Sp Midcap
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between SMCIX and SPMIX is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap Index and Sp Midcap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Midcap Index and Sp Smallcap 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 Sp Smallcap Index are associated (or correlated) with Sp Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Midcap Index has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Sp Midcap go up and down completely randomly.
Pair Corralation between Sp Smallcap and Sp Midcap
Assuming the 90 days horizon Sp Smallcap Index is expected to generate 1.38 times more return on investment than Sp Midcap. However, Sp Smallcap is 1.38 times more volatile than Sp Midcap Index. It trades about 0.12 of its potential returns per unit of risk. Sp Midcap Index is currently generating about 0.16 per unit of risk. If you would invest 2,383 in Sp Smallcap Index on August 25, 2024 and sell it today you would earn a total of 173.00 from holding Sp Smallcap Index or generate 7.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sp Smallcap Index vs. Sp Midcap Index
Performance |
| Timeline |
| Sp Smallcap Index |
| Sp Midcap Index |
Sp Smallcap and Sp Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sp Smallcap and Sp Midcap
The main advantage of trading using opposite Sp Smallcap and Sp Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sp Smallcap position performs unexpectedly, Sp Midcap 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 Sp Midcap will offset losses from the drop in Sp Midcap's long position.| Sp Smallcap vs. Sp Midcap Index | Sp Smallcap vs. Sp 500 Index | Sp Smallcap vs. Nasdaq 100 Index Fund | Sp Smallcap vs. Deutsche Sp 500 |
| Sp Midcap vs. Prudential High Yield | Sp Midcap vs. Multi Manager High Yield | Sp Midcap vs. Virtus High Yield | Sp Midcap vs. Pioneer 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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