Correlation Between Global Social and Small Cap
Can any of the company-specific risk be diversified away by investing in both Global Social 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 Global Social and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Social Awareness and Small Cap Special, you can compare the effects of market volatilities on Global Social 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 Global Social with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Social and Small Cap.
Diversification Opportunities for Global Social and Small Cap
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Global and Small is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Global Social Awareness and Small Cap Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Special and Global Social 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 Global Social Awareness 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 Special has no effect on the direction of Global Social i.e., Global Social and Small Cap go up and down completely randomly.
Pair Corralation between Global Social and Small Cap
Assuming the 90 days horizon Global Social Awareness is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Social Awareness is 2.1 times less risky than Small Cap. The mutual fund trades about -0.23 of its potential returns per unit of risk. The Small Cap Special is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,266 in Small Cap Special on August 27, 2024 and sell it today you would earn a total of 87.00 from holding Small Cap Special or generate 6.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Social Awareness vs. Small Cap Special
Performance |
| Timeline |
| Global Social Awareness |
| Small Cap Special |
Global Social and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Social and Small Cap
The main advantage of trading using opposite Global Social and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Social 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.| Global Social vs. Mid Cap Index | Global Social vs. Mid Cap Strategic | Global Social vs. Valic Company I | Global Social vs. Valic Company I |
| Small Cap vs. Quantitative Longshort Equity | Small Cap vs. Ultra Short Term Fixed | Small Cap vs. Ab Select Longshort | Small Cap vs. Nuveen Short Term |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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