Correlation Between Smallcap Fund and Locorr Long/short

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

Diversification Opportunities for Smallcap Fund and Locorr Long/short

0.57

Correlation Coefficient

Smallcap Fund  Locorr Long/short

Very weak diversification

The 3 months correlation between Smallcap and Locorr is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Fund Fka and Locorr Longshort Modities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locorr Longshort Modities 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 Locorr Long/short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locorr Longshort Modities has no effect on the direction of Smallcap Fund i.e., Smallcap Fund and Locorr Long/short go up and down completely randomly.

Pair Corralation between Smallcap Fund and Locorr Long/short

Assuming the 90 days horizon Smallcap Fund Fka is expected to generate 2.3 times more return on investment than Locorr Long/short. However, Smallcap Fund is 2.3 times more volatile than Locorr Longshort Modities. It trades about 0.12 of its potential returns per unit of risk. Locorr Longshort Modities is currently generating about 0.06 per unit of risk. If you would invest  2,462  in Smallcap Fund Fka on May 13, 2025 and sell it today you would earn a total of  154.00  from holding Smallcap Fund Fka or generate 6.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Smallcap Fund Fka  vs.  Locorr Longshort Modities

Smallcap Fund Fka

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Fund Fka are ranked lower than 9 (%) 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.

Locorr Longshort Modities

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Locorr Longshort Modities are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Locorr Long/short 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 Locorr Long/short

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

The idea behind Smallcap Fund Fka and Locorr Longshort Modities 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.