Correlation Between Select Fund and Small Cap
Can any of the company-specific risk be diversified away by investing in both Select Fund 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 Select Fund and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Fund Investor and Small Cap Growth, you can compare the effects of market volatilities on Select Fund 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 Select Fund with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Fund and Small Cap.
Diversification Opportunities for Select Fund and Small Cap
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Select and Small is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Select Fund Investor and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Select Fund 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 Select Fund Investor 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 Select Fund i.e., Select Fund and Small Cap go up and down completely randomly.
Pair Corralation between Select Fund and Small Cap
Assuming the 90 days horizon Select Fund is expected to generate 4.69 times less return on investment than Small Cap. But when comparing it to its historical volatility, Select Fund Investor is 1.25 times less risky than Small Cap. It trades about 0.07 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,577 in Small Cap Growth on August 26, 2024 and sell it today you would earn a total of 118.00 from holding Small Cap Growth or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Fund Investor vs. Small Cap Growth
Performance |
| Timeline |
| Select Fund Investor |
| Small Cap Growth |
Select Fund and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Fund and Small Cap
The main advantage of trading using opposite Select Fund and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Fund 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.| Select Fund vs. International Growth Fund | Select Fund vs. Heritage Fund Investor | Select Fund vs. Janus Global Research |
| Small Cap vs. Touchstone International Equity | Small Cap vs. Scharf Fund Retail | Small Cap vs. The Hartford Equity | Small Cap vs. Ab Select Equity |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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