Correlation Between Smallcap World and Anchor Risk

Can any of the company-specific risk be diversified away by investing in both Smallcap World and Anchor Risk 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 Anchor Risk 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 Anchor Risk Managed, you can compare the effects of market volatilities on Smallcap World and Anchor Risk 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 Anchor Risk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Anchor Risk.

Diversification Opportunities for Smallcap World and Anchor Risk

0.95

Correlation Coefficient

Smallcap World  Anchor Risk

Almost no diversification

The 3 months correlation between Smallcap and Anchor is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Anchor Risk Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anchor Risk Managed 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 Anchor Risk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anchor Risk Managed has no effect on the direction of Smallcap World i.e., Smallcap World and Anchor Risk go up and down completely randomly.

Pair Corralation between Smallcap World and Anchor Risk

Assuming the 90 days horizon Smallcap World Fund is expected to generate 2.72 times more return on investment than Anchor Risk. However, Smallcap World is 2.72 times more volatile than Anchor Risk Managed. It trades about 0.19 of its potential returns per unit of risk. Anchor Risk Managed is currently generating about 0.31 per unit of risk. If you would invest  6,946  in Smallcap World Fund on May 26, 2025 and sell it today you would earn a total of  638.00  from holding Smallcap World Fund or generate 9.19% return on investment over 90 days.

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

Smallcap World Fund  vs.  Anchor Risk Managed

Smallcap World

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Smallcap World may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Anchor Risk Managed

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Anchor Risk Managed are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Anchor Risk is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Smallcap World and Anchor Risk

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

The idea behind Smallcap World Fund and Anchor Risk Managed 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.