Correlation Between Smallcap World and Matson Money

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

Diversification Opportunities for Smallcap World and Matson Money

0.97

Correlation Coefficient

Smallcap World  Matson Money

Almost no diversification

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

Pair Corralation between Smallcap World and Matson Money

Assuming the 90 days horizon Smallcap World is expected to generate 1.05 times less return on investment than Matson Money. But when comparing it to its historical volatility, Smallcap World Fund is 1.17 times less risky than Matson Money. It trades about 0.2 of its potential returns per unit of risk. Matson Money Equity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,039  in Matson Money Equity on May 22, 2025 and sell it today you would earn a total of  293.00  from holding Matson Money Equity or generate 9.64% 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.  Matson Money Equity

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 15 (%) 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.

Matson Money Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Matson Money Equity are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Matson Money may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Smallcap World and Matson Money

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

The idea behind Smallcap World Fund and Matson Money Equity 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.