Correlation Between Small Cap and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Small Cap and Aggressive Growth 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 Aggressive Growth 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 Aggressive Growth Fund, you can compare the effects of market volatilities on Small Cap and Aggressive Growth 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 Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Aggressive Growth.
Diversification Opportunities for Small Cap and Aggressive Growth
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small and Aggressive is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Small Cap i.e., Small Cap and Aggressive Growth go up and down completely randomly.
Pair Corralation between Small Cap and Aggressive Growth
Assuming the 90 days horizon Small Cap is expected to generate 1.38 times less return on investment than Aggressive Growth. In addition to that, Small Cap is 1.03 times more volatile than Aggressive Growth Fund. It trades about 0.07 of its total potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.1 per unit of volatility. If you would invest 5,522 in Aggressive Growth Fund on August 29, 2024 and sell it today you would earn a total of 1,520 from holding Aggressive Growth Fund or generate 27.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.52% |
| Values | Daily Returns |
Small Cap Stock vs. Aggressive Growth Fund
Performance |
| Timeline |
| Small Cap Stock |
| Aggressive Growth |
Small Cap and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Aggressive Growth
The main advantage of trading using opposite Small Cap and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Aggressive Growth 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.| Small Cap vs. Franklin Adjustable Government | Small Cap vs. Dreyfus Government Cash | Small Cap vs. Lord Abbett Government | Small Cap vs. Inverse Government Long |
| Aggressive Growth vs. Us Government Securities | Aggressive Growth vs. Virtus Seix Government | Aggressive Growth vs. Blackrock Government Bond | Aggressive Growth vs. Inverse Government Long |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |