Correlation Between Small Cap and Growth Income
Can any of the company-specific risk be diversified away by investing in both Small Cap and Growth Income 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 Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Special and Growth Income Fund, you can compare the effects of market volatilities on Small Cap and Growth Income 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 Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Growth Income.
Diversification Opportunities for Small Cap and Growth Income
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and Growth is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Special and Growth Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Income 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 Special are associated (or correlated) with Growth Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Income has no effect on the direction of Small Cap i.e., Small Cap and Growth Income go up and down completely randomly.
Pair Corralation between Small Cap and Growth Income
Assuming the 90 days horizon Small Cap is expected to generate 1.22 times less return on investment than Growth Income. In addition to that, Small Cap is 1.43 times more volatile than Growth Income Fund. It trades about 0.06 of its total potential returns per unit of risk. Growth Income Fund is currently generating about 0.1 per unit of volatility. If you would invest 2,976 in Growth Income Fund on August 27, 2024 and sell it today you would earn a total of 490.00 from holding Growth Income Fund or generate 16.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Special vs. Growth Income Fund
Performance |
| Timeline |
| Small Cap Special |
| Growth Income |
Small Cap and Growth Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Growth Income
The main advantage of trading using opposite Small Cap and Growth Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Growth Income 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 Income will offset losses from the drop in Growth Income's long position.| Small Cap vs. Mid Cap Index | Small Cap vs. Mid Cap Strategic | Small Cap vs. Valic Company I | Small Cap vs. Valic Company I |
| Growth Income vs. Mid Cap Index | Growth Income vs. Mid Cap Strategic | Growth Income vs. Valic Company I | Growth Income vs. Small Cap Special |
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 CEOs Directory module to screen CEOs from public companies around the world.
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