Correlation Between Small-cap Value and Large-cap Value
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Large-cap Value 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 Large-cap Value 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 Large Cap Value Profund, you can compare the effects of market volatilities on Small-cap Value and Large-cap Value 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 Large-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Large-cap Value.
Diversification Opportunities for Small-cap Value and Large-cap Value
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small-cap and Large-cap is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Large Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Cap Value 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 Large-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Cap Value has no effect on the direction of Small-cap Value i.e., Small-cap Value and Large-cap Value go up and down completely randomly.
Pair Corralation between Small-cap Value and Large-cap Value
Assuming the 90 days horizon Small Cap Value Profund is expected to generate 2.38 times more return on investment than Large-cap Value. However, Small-cap Value is 2.38 times more volatile than Large Cap Value Profund. It trades about 0.23 of its potential returns per unit of risk. Large Cap Value Profund is currently generating about 0.3 per unit of risk. If you would invest 8,545 in Small Cap Value Profund on August 31, 2024 and sell it today you would earn a total of 735.00 from holding Small Cap Value Profund or generate 8.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Profund vs. Large Cap Value Profund
Performance |
| Timeline |
| Small Cap Value |
| Large Cap Value |
Small-cap Value and Large-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Large-cap Value
The main advantage of trading using opposite Small-cap Value and Large-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Large-cap Value 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 Large-cap Value will offset losses from the drop in Large-cap Value's long position.| Small-cap Value vs. Aqr Managed Futures | Small-cap Value vs. Fidelity Advisor 529 | Small-cap Value vs. Ab Bond Inflation | Small-cap Value vs. Arrow Managed Futures |
| Large-cap Value vs. Mutual Of America | Large-cap Value vs. Ultramid Cap Profund Ultramid Cap | Large-cap Value vs. Victory Rs Partners | Large-cap Value vs. Great West Loomis Sayles |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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