Correlation Between Ep Emerging and Smallcap Value

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

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

Diversification Opportunities for Ep Emerging and Smallcap Value

0.86

Correlation Coefficient

Ep Emerging  Smallcap Value

Very poor diversification

The 3 months correlation between EPASX and Smallcap is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ep Emerging Markets and Smallcap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Value and Ep Emerging 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 Ep Emerging Markets are associated (or correlated) with Smallcap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Value has no effect on the direction of Ep Emerging i.e., Ep Emerging and Smallcap Value go up and down completely randomly.

Pair Corralation between Ep Emerging and Smallcap Value

Assuming the 90 days horizon Ep Emerging is expected to generate 1.12 times less return on investment than Smallcap Value. But when comparing it to its historical volatility, Ep Emerging Markets is 2.1 times less risky than Smallcap Value. It trades about 0.23 of its potential returns per unit of risk. Smallcap Value Fund is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,108  in Smallcap Value Fund on June 29, 2025 and sell it today you would earn a total of  100.00  from holding Smallcap Value Fund or generate 9.03% return on investment over 90 days.

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

Ep Emerging Markets  vs.  Smallcap Value Fund

Ep Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ep Emerging Markets are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ep Emerging may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Smallcap Value

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Value Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Smallcap Value may actually be approaching a critical reversion point that can send shares even higher in October 2025.

Pair Trading with Ep Emerging and Smallcap Value

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

The idea behind Ep Emerging Markets and Smallcap Value Fund 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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.