Correlation Between Smallcap Fund and Rational Dividend

Can any of the company-specific risk be diversified away by investing in both Smallcap Fund and Rational Dividend 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 Rational Dividend 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 Rational Dividend Capture, you can compare the effects of market volatilities on Smallcap Fund and Rational Dividend 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 Rational Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Fund and Rational Dividend.

Diversification Opportunities for Smallcap Fund and Rational Dividend

0.74

Correlation Coefficient

Smallcap Fund  Rational Dividend

Poor diversification

The 3 months correlation between Smallcap and Rational is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Fund Fka and Rational Dividend Capture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Dividend Capture 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 Rational Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Dividend Capture has no effect on the direction of Smallcap Fund i.e., Smallcap Fund and Rational Dividend go up and down completely randomly.

Pair Corralation between Smallcap Fund and Rational Dividend

Assuming the 90 days horizon Smallcap Fund Fka is expected to under-perform the Rational Dividend. In addition to that, Smallcap Fund is 1.51 times more volatile than Rational Dividend Capture. It trades about -0.11 of its total potential returns per unit of risk. Rational Dividend Capture is currently generating about 0.13 per unit of volatility. If you would invest  1,054  in Rational Dividend Capture on July 14, 2025 and sell it today you would earn a total of  20.00  from holding Rational Dividend Capture or generate 1.9% return on investment over 90 days.

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

Smallcap Fund Fka  vs.  Rational Dividend Capture

Smallcap Fund Fka

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Fund Fka are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Smallcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rational Dividend Capture

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Dividend Capture are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Rational Dividend 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 Rational Dividend

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

The idea behind Smallcap Fund Fka and Rational Dividend Capture 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.