Correlation Between Smallcap Fund and Absolute Cef

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

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

Diversification Opportunities for Smallcap Fund and Absolute Cef

0.95

Correlation Coefficient

Smallcap Fund  Absolute Cef

Almost no diversification

The 3 months correlation between Smallcap and Absolute is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Fund Fka and Absolute Cef Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Cef Opportu and Smallcap Fund 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 Fund Fka are associated (or correlated) with Absolute Cef. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Cef Opportu has no effect on the direction of Smallcap Fund i.e., Smallcap Fund and Absolute Cef go up and down completely randomly.

Pair Corralation between Smallcap Fund and Absolute Cef

Assuming the 90 days horizon Smallcap Fund Fka is expected to generate 3.79 times more return on investment than Absolute Cef. However, Smallcap Fund is 3.79 times more volatile than Absolute Cef Opportunities. It trades about 0.25 of its potential returns per unit of risk. Absolute Cef Opportunities is currently generating about 0.26 per unit of risk. If you would invest  2,451  in Smallcap Fund Fka on June 8, 2025 and sell it today you would earn a total of  366.00  from holding Smallcap Fund Fka or generate 14.93% return on investment over 90 days.

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

Smallcap Fund Fka  vs.  Absolute Cef Opportunities

Smallcap Fund Fka

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Fund Fka are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Smallcap Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Absolute Cef Opportu

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Absolute Cef Opportunities are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Absolute Cef is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Smallcap Fund and Absolute Cef

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

The idea behind Smallcap Fund Fka and Absolute Cef Opportunities 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.