Correlation Between Small Pany and Smallcap World

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

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

Diversification Opportunities for Small Pany and Smallcap World

0.89

Correlation Coefficient

Small Pany  Smallcap World

Very poor diversification

The 3 months correlation between Small and Smallcap is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Small Pany 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 Pany Growth 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 Small Pany i.e., Small Pany and Smallcap World go up and down completely randomly.

Pair Corralation between Small Pany and Smallcap World

Assuming the 90 days horizon Small Pany Growth is expected to generate 1.83 times more return on investment than Smallcap World. However, Small Pany is 1.83 times more volatile than Smallcap World Fund. It trades about 0.17 of its potential returns per unit of risk. Smallcap World Fund is currently generating about 0.2 per unit of risk. If you would invest  1,539  in Small Pany Growth on May 15, 2025 and sell it today you would earn a total of  223.00  from holding Small Pany Growth or generate 14.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Small Pany Growth  vs.  Smallcap World Fund

Small Pany Growth

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Pany showed solid returns over the last few months and may actually be approaching a breakup point.

Smallcap World

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Smallcap World may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Small Pany and Smallcap World

The main advantage of trading using opposite Small Pany and Smallcap World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Pany 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 Small Pany Growth 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.