Correlation Between Amcap Fund and Small-cap Value

Can any of the company-specific risk be diversified away by investing in both Amcap Fund and Small-cap Value 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 Amcap Fund and Small-cap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Amcap Fund Class and Small Cap Value Series, you can compare the effects of market volatilities on Amcap Fund and Small-cap Value 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 Amcap Fund with a short position of Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and Small-cap Value.

Diversification Opportunities for Amcap Fund and Small-cap Value

0.96

Correlation Coefficient

Amcap Fund  Small-cap Value

Almost no diversification

The 3 months correlation between Amcap and Small-cap is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Small Cap Value Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Amcap Fund 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 Amcap Fund Class are associated (or correlated) with Small-cap Value. 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 Amcap Fund i.e., Amcap Fund and Small-cap Value go up and down completely randomly.

Pair Corralation between Amcap Fund and Small-cap Value

Assuming the 90 days horizon Amcap Fund Class is expected to generate 0.77 times more return on investment than Small-cap Value. However, Amcap Fund Class is 1.3 times less risky than Small-cap Value. It trades about 0.26 of its potential returns per unit of risk. Small Cap Value Series is currently generating about 0.15 per unit of risk. If you would invest  3,125  in Amcap Fund Class on May 2, 2025 and sell it today you would earn a total of  428.00  from holding Amcap Fund Class or generate 13.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Amcap Fund Class  vs.  Small Cap Value Series

Amcap Fund Class

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amcap Fund Class are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Amcap Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Small Cap Value

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value Series are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Small-cap Value may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Amcap Fund and Small-cap Value

The main advantage of trading using opposite Amcap Fund and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap Fund position performs unexpectedly, Small-cap Value 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 Value will offset losses from the drop in Small-cap Value's long position.

The idea behind Amcap Fund Class and Small Cap Value Series pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.