Correlation Between Small Cap and Growth Fund
Can any of the company-specific risk be diversified away by investing in both Small Cap and Growth 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 Growth 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 Growth Fund Growth, you can compare the effects of market volatilities on Small Cap and Growth 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 Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Growth Fund.
Diversification Opportunities for Small Cap and Growth Fund
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Growth is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Growth Fund Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund Growth has no effect on the direction of Small Cap i.e., Small Cap and Growth Fund go up and down completely randomly.
Pair Corralation between Small Cap and Growth Fund
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.04 times more return on investment than Growth Fund. However, Small Cap is 1.04 times more volatile than Growth Fund Growth. It trades about 0.09 of its potential returns per unit of risk. Growth Fund Growth is currently generating about 0.08 per unit of risk. If you would invest 1,319 in Small Cap Stock on September 2, 2024 and sell it today you would earn a total of 210.00 from holding Small Cap Stock or generate 15.92% 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. Growth Fund Growth
Performance |
| Timeline |
| Small Cap Stock |
| Growth Fund Growth |
Small Cap and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Growth Fund
The main advantage of trading using opposite Small Cap and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Growth 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 Growth Fund will offset losses from the drop in Growth Fund's long position.| Small Cap vs. Calamos Global Equity | Small Cap vs. Cutler Equity | Small Cap vs. Us Vector Equity | Small Cap vs. Small Cap Equity |
| Growth Fund vs. Goldman Sachs Real | Growth Fund vs. Tiaa Cref Real Estate | Growth Fund vs. Guggenheim Risk Managed | Growth Fund vs. Columbia Real Estate |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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