Correlation Between Investment and Zacks Small-cap

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

By analyzing existing cross correlation between Investment Of America and Zacks Small Cap E, you can compare the effects of market volatilities on Investment and Zacks 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 Investment with a short position of Zacks Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and Zacks Small-cap.

Diversification Opportunities for Investment and Zacks Small-cap

0.83

Correlation Coefficient

Investment  Zacks Small-cap

Very poor diversification

The 3 months correlation between Investment and Zacks is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Investment Of America and Zacks Small Cap E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zacks Small Cap and Investment 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 Investment Of America are associated (or correlated) with Zacks 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 Zacks Small Cap has no effect on the direction of Investment i.e., Investment and Zacks Small-cap go up and down completely randomly.

Pair Corralation between Investment and Zacks Small-cap

Assuming the 90 days horizon Investment is expected to generate 1.19 times less return on investment than Zacks Small-cap. But when comparing it to its historical volatility, Investment Of America is 1.58 times less risky than Zacks Small-cap. It trades about 0.13 of its potential returns per unit of risk. Zacks Small Cap E is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,376  in Zacks Small Cap E on July 29, 2025 and sell it today you would earn a total of  78.00  from holding Zacks Small Cap E or generate 2.31% return on investment over 90 days.

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

Investment Of America  vs.  Zacks Small Cap E

Investment Of America

Risk-Adjusted Performance

Fair

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

Zacks Small Cap

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Zacks Small Cap E are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Zacks Small-cap may actually be approaching a critical reversion point that can send shares even higher in November 2025.

Pair Trading with Investment and Zacks Small-cap

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

The idea behind Investment Of America and Zacks Small Cap E 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.