Correlation Between Smallcap Fund and Dynamic Opportunity

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

Diversification Opportunities for Smallcap Fund and Dynamic Opportunity

0.97

Correlation Coefficient

Smallcap Fund  Dynamic Opportunity

Almost no diversification

The 3 months correlation between Smallcap and Dynamic is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Fund Fka and Dynamic Opportunity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Opportunity 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 Dynamic Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Opportunity has no effect on the direction of Smallcap Fund i.e., Smallcap Fund and Dynamic Opportunity go up and down completely randomly.

Pair Corralation between Smallcap Fund and Dynamic Opportunity

Assuming the 90 days horizon Smallcap Fund Fka is expected to generate 1.45 times more return on investment than Dynamic Opportunity. However, Smallcap Fund is 1.45 times more volatile than Dynamic Opportunity Fund. It trades about 0.22 of its potential returns per unit of risk. Dynamic Opportunity Fund is currently generating about 0.26 per unit of risk. If you would invest  2,291  in Smallcap Fund Fka on April 30, 2025 and sell it today you would earn a total of  324.00  from holding Smallcap Fund Fka or generate 14.14% 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.  Dynamic Opportunity Fund

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 17 (%) 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.

Dynamic Opportunity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Opportunity Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dynamic Opportunity may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Smallcap Fund and Dynamic Opportunity

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

The idea behind Smallcap Fund Fka and Dynamic Opportunity 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .