Correlation Between Small-cap Value and Us Government
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Us Government 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 Value and Us Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Profund and Us Government Plus, you can compare the effects of market volatilities on Small-cap Value and Us Government 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 Value with a short position of Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Us Government.
Diversification Opportunities for Small-cap Value and Us Government
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Small-cap and GVPSX is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Us Government Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Plus and Small-cap Value 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 Value Profund are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Plus has no effect on the direction of Small-cap Value i.e., Small-cap Value and Us Government go up and down completely randomly.
Pair Corralation between Small-cap Value and Us Government
Assuming the 90 days horizon Small Cap Value Profund is expected to generate 1.19 times more return on investment than Us Government. However, Small-cap Value is 1.19 times more volatile than Us Government Plus. It trades about 0.07 of its potential returns per unit of risk. Us Government Plus is currently generating about -0.01 per unit of risk. If you would invest 9,616 in Small Cap Value Profund on August 27, 2024 and sell it today you would earn a total of 2,173 from holding Small Cap Value Profund or generate 22.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Profund vs. Us Government Plus
Performance |
| Timeline |
| Small Cap Value |
| Us Government Plus |
Small-cap Value and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Us Government
The main advantage of trading using opposite Small-cap Value and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Us Government 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 Us Government will offset losses from the drop in Us Government's long position.| Small-cap Value vs. Short Real Estate | Small-cap Value vs. Short Real Estate | Small-cap Value vs. Ultrashort Mid Cap Profund | Small-cap Value vs. Ultrashort Mid Cap Profund |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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