Correlation Between Small Cap and Barings Emerging
Can any of the company-specific risk be diversified away by investing in both Small Cap and Barings Emerging 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 and Barings Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Barings Emerging Markets, you can compare the effects of market volatilities on Small Cap and Barings Emerging 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 with a short position of Barings Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Barings Emerging.
Diversification Opportunities for Small Cap and Barings Emerging
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Barings is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Barings Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Emerging Markets and Small Cap 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 Stock are associated (or correlated) with Barings Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Emerging Markets has no effect on the direction of Small Cap i.e., Small Cap and Barings Emerging go up and down completely randomly.
Pair Corralation between Small Cap and Barings Emerging
Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Barings Emerging. In addition to that, Small Cap is 4.71 times more volatile than Barings Emerging Markets. It trades about -0.04 of its total potential returns per unit of risk. Barings Emerging Markets is currently generating about 0.1 per unit of volatility. If you would invest 756.00 in Barings Emerging Markets on September 13, 2024 and sell it today you would earn a total of 3.00 from holding Barings Emerging Markets or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Barings Emerging Markets
Performance |
| Timeline |
| Small Cap Stock |
| Barings Emerging Markets |
Small Cap and Barings Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Barings Emerging
The main advantage of trading using opposite Small Cap and Barings Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Barings Emerging 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 Barings Emerging will offset losses from the drop in Barings Emerging's long position.| Small Cap vs. Goldman Sachs Real | Small Cap vs. Fidelity Real Estate | Small Cap vs. Redwood Real Estate | Small Cap vs. Vy Clarion Real |
| Barings Emerging vs. Barings Active Short | Barings Emerging vs. Barings Emerging Markets | Barings Emerging vs. Barings Active Short | Barings Emerging vs. Barings Global Floating |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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