Correlation Between Smallcap Growth and International Fund

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

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

Diversification Opportunities for Smallcap Growth and International Fund

0.8

Correlation Coefficient

Smallcap Growth  International Fund

Very poor diversification

The 3 months correlation between Smallcap and International is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and International Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Fund and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with International Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Fund has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and International Fund go up and down completely randomly.

Pair Corralation between Smallcap Growth and International Fund

Assuming the 90 days horizon Smallcap Growth is expected to generate 1.36 times less return on investment than International Fund. In addition to that, Smallcap Growth is 1.34 times more volatile than International Fund I. It trades about 0.1 of its total potential returns per unit of risk. International Fund I is currently generating about 0.18 per unit of volatility. If you would invest  1,424  in International Fund I on May 13, 2025 and sell it today you would earn a total of  112.00  from holding International Fund I or generate 7.87% return on investment over 90 days.

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

Smallcap Growth Fund  vs.  International Fund I

Smallcap Growth

Risk-Adjusted Performance

Fair

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

International Fund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Fund I are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, International Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Smallcap Growth and International Fund

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

The idea behind Smallcap Growth Fund and International Fund I 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.