Correlation Between Small Cap and Value Fund
Can any of the company-specific risk be diversified away by investing in both Small Cap and Value Fund 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 Value Fund 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 Value Fund Value, you can compare the effects of market volatilities on Small Cap and Value Fund 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 Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Value Fund.
Diversification Opportunities for Small Cap and Value Fund
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Value is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Small Cap i.e., Small Cap and Value Fund go up and down completely randomly.
Pair Corralation between Small Cap and Value Fund
Assuming the 90 days horizon Small Cap is expected to generate 1.14 times less return on investment than Value Fund. In addition to that, Small Cap is 1.42 times more volatile than Value Fund Value. It trades about 0.21 of its total potential returns per unit of risk. Value Fund Value is currently generating about 0.34 per unit of volatility. If you would invest 1,863 in Value Fund Value on October 24, 2024 and sell it today you would earn a total of 83.00 from holding Value Fund Value or generate 4.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Value Fund Value
Performance |
| Timeline |
| Small Cap Stock |
| Value Fund Value |
Small Cap and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Value Fund
The main advantage of trading using opposite Small Cap and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund's long position.| Small Cap vs. Locorr Market Trend | Small Cap vs. Goldman Sachs Local | Small Cap vs. Oklahoma College Savings | Small Cap vs. Ab All Market |
| Value Fund vs. Small Cap Stock | Value Fund vs. Lord Abbett Diversified | Value Fund vs. Issachar Fund Class | Value Fund vs. Alternative Asset Allocation |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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