Correlation Between Smallcap World and Pfg Invesco

Can any of the company-specific risk be diversified away by investing in both Smallcap World and Pfg Invesco 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 Smallcap World and Pfg Invesco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Smallcap World Fund and Pfg Invesco Thematic, you can compare the effects of market volatilities on Smallcap World and Pfg Invesco 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 Smallcap World with a short position of Pfg Invesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Pfg Invesco.

Diversification Opportunities for Smallcap World and Pfg Invesco

0.97

Correlation Coefficient

Smallcap World  Pfg Invesco

Almost no diversification

The 3 months correlation between Smallcap and Pfg is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Pfg Invesco Thematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfg Invesco Thematic and Smallcap World 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 Smallcap World Fund are associated (or correlated) with Pfg Invesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfg Invesco Thematic has no effect on the direction of Smallcap World i.e., Smallcap World and Pfg Invesco go up and down completely randomly.

Pair Corralation between Smallcap World and Pfg Invesco

Assuming the 90 days horizon Smallcap World Fund is expected to generate 1.28 times more return on investment than Pfg Invesco. However, Smallcap World is 1.28 times more volatile than Pfg Invesco Thematic. It trades about 0.37 of its potential returns per unit of risk. Pfg Invesco Thematic is currently generating about 0.31 per unit of risk. If you would invest  5,666  in Smallcap World Fund on April 20, 2025 and sell it today you would earn a total of  1,157  from holding Smallcap World Fund or generate 20.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Smallcap World Fund  vs.  Pfg Invesco Thematic

Smallcap World

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Smallcap World showed solid returns over the last few months and may actually be approaching a breakup point.

Pfg Invesco Thematic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pfg Invesco Thematic are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Pfg Invesco showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smallcap World and Pfg Invesco

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

The idea behind Smallcap World Fund and Pfg Invesco Thematic 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.