Correlation Between Smallcap World and Simt Multi-strategy

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

Diversification Opportunities for Smallcap World and Simt Multi-strategy

0.98

Correlation Coefficient

Smallcap World  Simt Multi-strategy

Almost no diversification

The 3 months correlation between Smallcap and Simt is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Simt Multi Strategy Alternativ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Multi Strategy 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 Simt Multi-strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Multi Strategy has no effect on the direction of Smallcap World i.e., Smallcap World and Simt Multi-strategy go up and down completely randomly.

Pair Corralation between Smallcap World and Simt Multi-strategy

Assuming the 90 days horizon Smallcap World Fund is expected to generate 3.0 times more return on investment than Simt Multi-strategy. However, Smallcap World is 3.0 times more volatile than Simt Multi Strategy Alternative. It trades about 0.28 of its potential returns per unit of risk. Simt Multi Strategy Alternative is currently generating about 0.41 per unit of risk. If you would invest  6,479  in Smallcap World Fund on April 30, 2025 and sell it today you would earn a total of  926.00  from holding Smallcap World Fund or generate 14.29% 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.  Simt Multi Strategy Alternativ

Smallcap World

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 22 (%) 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.

Simt Multi Strategy

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Multi Strategy Alternative are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Simt Multi-strategy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Smallcap World and Simt Multi-strategy

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

The idea behind Smallcap World Fund and Simt Multi Strategy Alternative 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.