Correlation Between Small-cap Value and Small Cap
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Small Cap 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 Small Cap 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 Small Cap Growth Profund, you can compare the effects of market volatilities on Small-cap Value and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Small Cap.
Diversification Opportunities for Small-cap Value and Small Cap
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small-cap and Small is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Small Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth 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 Small Cap. 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 Growth has no effect on the direction of Small-cap Value i.e., Small-cap Value and Small Cap go up and down completely randomly.
Pair Corralation between Small-cap Value and Small Cap
Assuming the 90 days horizon Small Cap Value Profund is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Value Profund is 1.15 times less risky than Small Cap. The mutual fund trades about -0.32 of its potential returns per unit of risk. The Small Cap Growth Profund is currently generating about -0.26 of returns per unit of risk over similar time horizon. If you would invest 11,818 in Small Cap Growth Profund on October 14, 2024 and sell it today you would lose (734.00) from holding Small Cap Growth Profund or give up 6.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Profund vs. Small Cap Growth Profund
Performance |
| Timeline |
| Small Cap Value |
| Small Cap Growth |
Small-cap Value and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Small Cap
The main advantage of trading using opposite Small-cap Value and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Small Cap 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 will offset losses from the drop in Small Cap's long position.| Small-cap Value vs. Fidelity Capital Income | Small-cap Value vs. Simt High Yield | Small-cap Value vs. T Rowe Price | Small-cap Value vs. Gmo High Yield |
| Small Cap vs. Small Cap Value Profund | Small Cap vs. Mid Cap Growth Profund | Small Cap vs. Mid Cap Value Profund | Small Cap vs. Small Cap Profund Small Cap |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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