Correlation Between Small Cap and Sa Emerging

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

Diversification Opportunities for Small Cap and Sa Emerging

0.78

Correlation Coefficient

Small Cap  Sa Emerging

Poor diversification

The 3 months correlation between Small and SAEMX is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Sa Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sa Emerging Markets 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 Sa Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sa Emerging Markets has no effect on the direction of Small Cap i.e., Small Cap and Sa Emerging go up and down completely randomly.

Pair Corralation between Small Cap and Sa Emerging

Assuming the 90 days horizon Small Cap is expected to generate 1.33 times less return on investment than Sa Emerging. In addition to that, Small Cap is 1.93 times more volatile than Sa Emerging Markets. It trades about 0.1 of its total potential returns per unit of risk. Sa Emerging Markets is currently generating about 0.25 per unit of volatility. If you would invest  1,155  in Sa Emerging Markets on August 5, 2025 and sell it today you would earn a total of  115.00  from holding Sa Emerging Markets or generate 9.96% return on investment over 90 days.

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

Small Cap Core  vs.  Sa Emerging Markets

Small Cap Core

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Core are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in December 2025.

Sa Emerging Markets

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sa Emerging Markets are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Sa Emerging may actually be approaching a critical reversion point that can send shares even higher in December 2025.

Pair Trading with Small Cap and Sa Emerging

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

The idea behind Small Cap Core and Sa Emerging Markets 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 Commodity Directory module to find actively traded commodities issued by global exchanges.