Correlation Between Small-cap Value and Community Reinvestment

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

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

Diversification Opportunities for Small-cap Value and Community Reinvestment

0.66

Correlation Coefficient

Small-cap Value  Community Reinvestment

Poor diversification

The 3 months correlation between Small-cap and Community is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and Community Reinvestment Act in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Reinvestment and Small-cap Value 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 Value Fund are associated (or correlated) with Community Reinvestment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Reinvestment has no effect on the direction of Small-cap Value i.e., Small-cap Value and Community Reinvestment go up and down completely randomly.

Pair Corralation between Small-cap Value and Community Reinvestment

Assuming the 90 days horizon Small Cap Value Fund is expected to generate 4.84 times more return on investment than Community Reinvestment. However, Small-cap Value is 4.84 times more volatile than Community Reinvestment Act. It trades about 0.05 of its potential returns per unit of risk. Community Reinvestment Act is currently generating about 0.13 per unit of risk. If you would invest  3,471  in Small Cap Value Fund on May 12, 2025 and sell it today you would earn a total of  101.00  from holding Small Cap Value Fund or generate 2.91% return on investment over 90 days.

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

Small Cap Value Fund  vs.  Community Reinvestment Act

Small Cap Value

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value Fund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Small-cap Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Community Reinvestment

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Community Reinvestment Act are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Community Reinvestment is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small-cap Value and Community Reinvestment

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

The idea behind Small Cap Value Fund and Community Reinvestment Act 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.