Correlation Between Income Fund and Small Company

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

By analyzing existing cross correlation between Income Fund Institutional and Small Pany Fund, you can compare the effects of market volatilities on Income Fund and Small Company 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 Income Fund with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and Small Company.

Diversification Opportunities for Income Fund and Small Company

0.59

Correlation Coefficient

Income Fund  Small Company

Very weak diversification

The 3 months correlation between Income and Small is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Institutional and Small Pany Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Fund and Income Fund 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 Income Fund Institutional are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Fund has no effect on the direction of Income Fund i.e., Income Fund and Small Company go up and down completely randomly.

Pair Corralation between Income Fund and Small Company

Assuming the 90 days horizon Income Fund Institutional is expected to generate 0.25 times more return on investment than Small Company. However, Income Fund Institutional is 3.95 times less risky than Small Company. It trades about 0.14 of its potential returns per unit of risk. Small Pany Fund is currently generating about 0.03 per unit of risk. If you would invest  905.00  in Income Fund Institutional on May 12, 2025 and sell it today you would earn a total of  23.00  from holding Income Fund Institutional or generate 2.54% return on investment over 90 days.

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

Income Fund Institutional  vs.  Small Pany Fund

Income Fund Institutional

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Income Fund Institutional are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Income Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Pany Fund

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Small Company is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Income Fund and Small Company

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

The idea behind Income Fund Institutional and Small Pany 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 CEOs Directory module to screen CEOs from public companies around the world.