Correlation Between Small-cap Value and Real Estate
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Real Estate 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 Real Estate 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 Real Estate Ultrasector, you can compare the effects of market volatilities on Small-cap Value and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Real Estate.
Diversification Opportunities for Small-cap Value and Real Estate
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between SMALL-CAP and Real is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Real Estate Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate Ultrasector 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate Ultrasector has no effect on the direction of Small-cap Value i.e., Small-cap Value and Real Estate go up and down completely randomly.
Pair Corralation between Small-cap Value and Real Estate
Assuming the 90 days horizon Small Cap Value Profund is expected to generate 0.81 times more return on investment than Real Estate. However, Small Cap Value Profund is 1.24 times less risky than Real Estate. It trades about 0.05 of its potential returns per unit of risk. Real Estate Ultrasector is currently generating about 0.04 per unit of risk. If you would invest 7,674 in Small Cap Value Profund on November 3, 2024 and sell it today you would earn a total of 1,123 from holding Small Cap Value Profund or generate 14.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Small Cap Value Profund vs. Real Estate Ultrasector
Performance |
| Timeline |
| Small Cap Value |
| Real Estate Ultrasector |
Small-cap Value and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Real Estate
The main advantage of trading using opposite Small-cap Value and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.| Small-cap Value vs. American Funds Retirement | Small-cap Value vs. Dimensional Retirement Income | Small-cap Value vs. Great West Moderately Aggressive | Small-cap Value vs. Putnman Retirement Ready |
| Real Estate vs. Aqr Global Macro | Real Estate vs. Ab Global Bond | Real Estate vs. Kinetics Global Fund | Real Estate vs. Morningstar Global Income |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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