Correlation Between Intermediate-term and Smallcap Fund

Can any of the company-specific risk be diversified away by investing in both Intermediate-term and Smallcap Fund 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 Intermediate-term and Smallcap Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Intermediate Term Bond Fund and Smallcap Fund Fka, you can compare the effects of market volatilities on Intermediate-term and Smallcap Fund 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 Intermediate-term with a short position of Smallcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Smallcap Fund.

Diversification Opportunities for Intermediate-term and Smallcap Fund

0.84

Correlation Coefficient

Intermediate-term  Smallcap Fund

Very poor diversification

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

Pair Corralation between Intermediate-term and Smallcap Fund

Assuming the 90 days horizon Intermediate-term is expected to generate 3.57 times less return on investment than Smallcap Fund. But when comparing it to its historical volatility, Intermediate Term Bond Fund is 3.19 times less risky than Smallcap Fund. It trades about 0.14 of its potential returns per unit of risk. Smallcap Fund Fka is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,465  in Smallcap Fund Fka on May 19, 2025 and sell it today you would earn a total of  238.00  from holding Smallcap Fund Fka or generate 9.66% return on investment over 90 days.

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

Intermediate Term Bond Fund  vs.  Smallcap Fund Fka

Intermediate Term Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Term Bond Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Intermediate-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Smallcap Fund Fka

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Fund Fka are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak primary indicators, Smallcap Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Intermediate-term and Smallcap Fund

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

The idea behind Intermediate Term Bond Fund and Smallcap Fund Fka 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.