Correlation Between Small Cap and Ab Small
Can any of the company-specific risk be diversified away by investing in both Small Cap and Ab Small 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 Small Cap and Ab Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and Ab Small Cap, you can compare the effects of market volatilities on Small Cap and Ab Small 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 Small Cap with a short position of Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Ab Small.
Diversification Opportunities for Small Cap and Ab Small
Almost no diversification
The 3 months correlation between Small and SCAVX is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap and Small Cap 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 Small Cap Core are associated (or correlated) with Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Small Cap i.e., Small Cap and Ab Small go up and down completely randomly.
Pair Corralation between Small Cap and Ab Small
Assuming the 90 days horizon Small Cap Core is expected to generate 0.96 times more return on investment than Ab Small. However, Small Cap Core is 1.05 times less risky than Ab Small. It trades about 0.22 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.19 per unit of risk. If you would invest 1,051 in Small Cap Core on April 25, 2025 and sell it today you would earn a total of 165.00 from holding Small Cap Core or generate 15.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Small Cap Core vs. Ab Small Cap
Performance |
Timeline |
Small Cap Core |
Ab Small Cap |
Small Cap and Ab Small Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and Ab Small
The main advantage of trading using opposite Small Cap and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Ab Small 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 Ab Small will offset losses from the drop in Ab Small's long position.The idea behind Small Cap Core and Ab Small Cap 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.Ab Small vs. Ishares Municipal Bond | Ab Small vs. Legg Mason Partners | Ab Small vs. California Municipal Portfolio | Ab Small vs. Short Term Government Fund |
Check out your portfolio center.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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