Correlation Between Sp Smallcap and Commodities Strategy

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

By analyzing existing cross correlation between Sp Smallcap 600 and Commodities Strategy Fund, you can compare the effects of market volatilities on Sp Smallcap and Commodities Strategy 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 Sp Smallcap with a short position of Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Commodities Strategy.

Diversification Opportunities for Sp Smallcap and Commodities Strategy

0.73

Correlation Coefficient

Sp Smallcap  Commodities Strategy

Poor diversification

The 3 months correlation between RYAZX and Commodities is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Sp Smallcap 600 and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Sp Smallcap 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 Sp Smallcap 600 are associated (or correlated) with Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Sp Smallcap i.e., Sp Smallcap and Commodities Strategy go up and down completely randomly.

Pair Corralation between Sp Smallcap and Commodities Strategy

Assuming the 90 days horizon Sp Smallcap 600 is expected to generate 1.34 times more return on investment than Commodities Strategy. However, Sp Smallcap is 1.34 times more volatile than Commodities Strategy Fund. It trades about 0.15 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.16 per unit of risk. If you would invest  17,315  in Sp Smallcap 600 on May 3, 2025 and sell it today you would earn a total of  2,386  from holding Sp Smallcap 600 or generate 13.78% return on investment over 90 days.

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

Sp Smallcap 600  vs.  Commodities Strategy Fund

Sp Smallcap 600

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sp Smallcap 600 are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Sp Smallcap showed solid returns over the last few months and may actually be approaching a breakup point.

Commodities Strategy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commodities Strategy Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental drivers, Commodities Strategy may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Sp Smallcap and Commodities Strategy

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

The idea behind Sp Smallcap 600 and Commodities Strategy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.