Correlation Between Small Cap and Global Hard

Can any of the company-specific risk be diversified away by investing in both Small Cap and Global Hard 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 Global Hard into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Small Cap Growth Profund and Global Hard Assets, you can compare the effects of market volatilities on Small Cap and Global Hard 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 Global Hard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Global Hard.

Diversification Opportunities for Small Cap and Global Hard

0.84

Correlation Coefficient

Small Cap  Global Hard

Very poor diversification

The 3 months correlation between Small and Global is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth Profund and Global Hard Assets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Hard Assets 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 Growth Profund are associated (or correlated) with Global Hard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Hard Assets has no effect on the direction of Small Cap i.e., Small Cap and Global Hard go up and down completely randomly.

Pair Corralation between Small Cap and Global Hard

Assuming the 90 days horizon Small Cap is expected to generate 1.15 times less return on investment than Global Hard. In addition to that, Small Cap is 1.26 times more volatile than Global Hard Assets. It trades about 0.12 of its total potential returns per unit of risk. Global Hard Assets is currently generating about 0.17 per unit of volatility. If you would invest  3,966  in Global Hard Assets on May 21, 2025 and sell it today you would earn a total of  342.00  from holding Global Hard Assets or generate 8.62% return on investment over 90 days.

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

Small Cap Growth Profund  vs.  Global Hard Assets

Small Cap Growth

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Growth Profund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Small Cap may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Global Hard Assets

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Global Hard Assets are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Hard may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Small Cap and Global Hard

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

The idea behind Small Cap Growth Profund and Global Hard Assets 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.