Correlation Between Small Cap and Multi Asset

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

Diversification Opportunities for Small Cap and Multi Asset

0.39

Correlation Coefficient

Small Cap  Multi Asset

Weak diversification

The 3 months correlation between Small and Multi is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Growth Profund and Multi Asset Growth Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Asset Growth 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 Multi Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Asset Growth has no effect on the direction of Small Cap i.e., Small Cap and Multi Asset go up and down completely randomly.

Pair Corralation between Small Cap and Multi Asset

Assuming the 90 days horizon Small Cap is expected to generate 3.76 times less return on investment than Multi Asset. In addition to that, Small Cap is 2.6 times more volatile than Multi Asset Growth Strategy. It trades about 0.01 of its total potential returns per unit of risk. Multi Asset Growth Strategy is currently generating about 0.06 per unit of volatility. If you would invest  1,179  in Multi Asset Growth Strategy on September 18, 2025 and sell it today you would earn a total of  19.00  from holding Multi Asset Growth Strategy or generate 1.61% return on investment over 90 days.

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

Small Cap Growth Profund  vs.  Multi Asset Growth Strategy

Small Cap Growth

Risk-Adjusted Performance

Weakest

Over the last 90 days Small Cap Growth Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multi Asset Growth

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Asset Growth Strategy are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Multi Asset

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

The idea behind Small Cap Growth Profund and Multi Asset Growth Strategy 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 Stocks Directory module to find actively traded stocks across global markets.