Correlation Between Small Cap and Forester Value

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

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

Diversification Opportunities for Small Cap and Forester Value

-0.31

Correlation Coefficient

Small Cap  Forester Value

Very good diversification

The 3 months correlation between Small and Forester is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Profund Small Cap and Forester Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forester Value 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 Profund Small Cap are associated (or correlated) with Forester Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forester Value has no effect on the direction of Small Cap i.e., Small Cap and Forester Value go up and down completely randomly.

Pair Corralation between Small Cap and Forester Value

Assuming the 90 days horizon Small Cap Profund Small Cap is expected to generate 2.84 times more return on investment than Forester Value. However, Small Cap is 2.84 times more volatile than Forester Value Fund. It trades about 0.14 of its potential returns per unit of risk. Forester Value Fund is currently generating about -0.03 per unit of risk. If you would invest  7,968  in Small Cap Profund Small Cap on May 3, 2025 and sell it today you would earn a total of  780.00  from holding Small Cap Profund Small Cap or generate 9.79% return on investment over 90 days.

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

Small Cap Profund Small Cap  vs.  Forester Value Fund

Small Cap Profund

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Profund Small Cap are ranked lower than 11 (%) 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 September 2025.

Forester Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forester Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Forester Value 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 Forester Value

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

The idea behind Small Cap Profund Small Cap and Forester Value 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.