Correlation Between Small-cap Value and Scharf Global

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

By analyzing existing cross correlation between Small Cap Value Series and Scharf Global Opportunity, you can compare the effects of market volatilities on Small-cap Value and Scharf Global 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 Small-cap Value with a short position of Scharf Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Scharf Global.

Diversification Opportunities for Small-cap Value and Scharf Global

-0.5

Correlation Coefficient

Small-cap Value  Scharf Global

Very good diversification

The 3 months correlation between Small-cap and Scharf is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Scharf Global Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scharf Global Opportunity and Small-cap Value 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 Small Cap Value Series are associated (or correlated) with Scharf Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scharf Global Opportunity has no effect on the direction of Small-cap Value i.e., Small-cap Value and Scharf Global go up and down completely randomly.

Pair Corralation between Small-cap Value and Scharf Global

Assuming the 90 days horizon Small-cap Value is expected to generate 2.94 times less return on investment than Scharf Global. In addition to that, Small-cap Value is 2.12 times more volatile than Scharf Global Opportunity. It trades about 0.02 of its total potential returns per unit of risk. Scharf Global Opportunity is currently generating about 0.13 per unit of volatility. If you would invest  3,789  in Scharf Global Opportunity on July 19, 2025 and sell it today you would earn a total of  85.00  from holding Scharf Global Opportunity or generate 2.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	49.21%
Values	Daily Returns

Small Cap Value Series  vs.  Scharf Global Opportunity

Small Cap Value

Risk-Adjusted Performance

Weak

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

Scharf Global Opportunity

Risk-Adjusted Performance

Fair

Over the last 90 days Scharf Global Opportunity has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Scharf Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small-cap Value and Scharf Global

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

The idea behind Small Cap Value Series and Scharf Global Opportunity 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.