Correlation Between Rational Dividend and Smallcap World

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

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

Diversification Opportunities for Rational Dividend and Smallcap World

0.63

Correlation Coefficient

Rational Dividend  Smallcap World

Poor diversification

The 3 months correlation between Rational and Smallcap is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Rational Dividend Capture and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Rational Dividend 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 Rational Dividend Capture are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Rational Dividend i.e., Rational Dividend and Smallcap World go up and down completely randomly.

Pair Corralation between Rational Dividend and Smallcap World

Assuming the 90 days horizon Rational Dividend Capture is expected to generate 0.61 times more return on investment than Smallcap World. However, Rational Dividend Capture is 1.64 times less risky than Smallcap World. It trades about 0.23 of its potential returns per unit of risk. Smallcap World Fund is currently generating about 0.09 per unit of risk. If you would invest  1,010  in Rational Dividend Capture on July 11, 2025 and sell it today you would earn a total of  68.00  from holding Rational Dividend Capture or generate 6.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Rational Dividend Capture  vs.  Smallcap World Fund

Rational Dividend Capture

Risk-Adjusted Performance

Solid

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

Smallcap World

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Smallcap World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rational Dividend and Smallcap World

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

The idea behind Rational Dividend Capture and Smallcap World 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..