Correlation Between Qs Defensive and Small Cap

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

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

Diversification Opportunities for Qs Defensive and Small Cap

0.94

Correlation Coefficient

Qs Defensive  Small Cap

Almost no diversification

The 3 months correlation between LMLRX and Small is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Qs Defensive Growth and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core and Qs Defensive 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 Qs Defensive Growth 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 Core has no effect on the direction of Qs Defensive i.e., Qs Defensive and Small Cap go up and down completely randomly.

Pair Corralation between Qs Defensive and Small Cap

Assuming the 90 days horizon Qs Defensive Growth is expected to generate 0.28 times more return on investment than Small Cap. However, Qs Defensive Growth is 3.51 times less risky than Small Cap. It trades about 0.21 of its potential returns per unit of risk. Small Cap Core is currently generating about 0.06 per unit of risk. If you would invest  1,298  in Qs Defensive Growth on May 13, 2025 and sell it today you would earn a total of  51.00  from holding Qs Defensive Growth or generate 3.93% return on investment over 90 days.

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

Qs Defensive Growth  vs.  Small Cap Core

Qs Defensive Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Qs Defensive Growth are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Qs Defensive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Core

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Core are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Qs Defensive and Small Cap

The main advantage of trading using opposite Qs Defensive and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qs Defensive 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 Qs Defensive Growth and Small Cap Core 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.