Correlation Between Consumer Services and Small Cap

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

By analyzing existing cross correlation between Consumer Services Ultrasector and Small Cap Value Profund, you can compare the effects of market volatilities on Consumer Services and 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 Consumer Services with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Services and Small Cap.

Diversification Opportunities for Consumer Services and Small Cap

0.92

Correlation Coefficient

Consumer Services  Small Cap

Almost no diversification

The 3 months correlation between Consumer and Small is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Services Ultrasector and Small Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Consumer Services 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 Consumer Services Ultrasector are associated (or correlated) with 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 Small Cap Value has no effect on the direction of Consumer Services i.e., Consumer Services and Small Cap go up and down completely randomly.

Pair Corralation between Consumer Services and Small Cap

Assuming the 90 days horizon Consumer Services Ultrasector is expected to generate 1.39 times more return on investment than Small Cap. However, Consumer Services is 1.39 times more volatile than Small Cap Value Profund. It trades about 0.18 of its potential returns per unit of risk. Small Cap Value Profund is currently generating about 0.16 per unit of risk. If you would invest  6,002  in Consumer Services Ultrasector on April 30, 2025 and sell it today you would earn a total of  1,226  from holding Consumer Services Ultrasector or generate 20.43% return on investment over 90 days.

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

Consumer Services Ultrasector  vs.  Small Cap Value Profund

Consumer Services

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Services Ultrasector are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Consumer Services showed solid returns over the last few months and may actually be approaching a breakup point.

Small Cap Value

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value Profund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Small Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consumer Services and Small Cap

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

The idea behind Consumer Services Ultrasector and Small Cap Value Profund 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.