Correlation Between Extended Market and Small Cap
Can any of the company-specific risk be diversified away by investing in both Extended Market 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 Extended Market and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Small Cap Value, you can compare the effects of market volatilities on Extended Market 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 Extended Market with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Small Cap.
Diversification Opportunities for Extended Market and Small Cap
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between EXTENDED and Small is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Extended Market 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 Extended Market Index 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 Value has no effect on the direction of Extended Market i.e., Extended Market and Small Cap go up and down completely randomly.
Pair Corralation between Extended Market and Small Cap
If you would invest 2,131 in Extended Market Index on August 31, 2024 and sell it today you would earn a total of 388.00 from holding Extended Market Index or generate 18.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 0.0% |
| Values | Daily Returns |
Extended Market Index vs. Small Cap Value
Performance |
| Timeline |
| Extended Market Index |
| Small Cap Value |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Extended Market and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Small Cap
The main advantage of trading using opposite Extended Market and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market 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.| Extended Market vs. T Rowe Price | Extended Market vs. Morningstar Aggressive Growth | Extended Market vs. Ab Global Risk | Extended Market vs. Lgm Risk Managed |
| Small Cap vs. Pgim Conservative Retirement | Small Cap vs. Fidelity Advisor Diversified | Small Cap vs. Pimco Diversified Income | Small Cap vs. Evaluator Conservative Rms |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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