Correlation Between Small Cap and Value Fund
Can any of the company-specific risk be diversified away by investing in both Small Cap and Value 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 Small Cap and Value Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Stock and Value Fund Value, you can compare the effects of market volatilities on Small Cap and Value 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 Small Cap with a short position of Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Value Fund.
Diversification Opportunities for Small Cap and Value Fund
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Small and Value is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund 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 Stock are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Small Cap i.e., Small Cap and Value Fund go up and down completely randomly.
Pair Corralation between Small Cap and Value Fund
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.5 times more return on investment than Value Fund. However, Small Cap is 1.5 times more volatile than Value Fund Value. It trades about 0.2 of its potential returns per unit of risk. Value Fund Value is currently generating about 0.19 per unit of risk. If you would invest 1,190 in Small Cap Stock on April 30, 2025 and sell it today you would earn a total of 177.00 from holding Small Cap Stock or generate 14.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Small Cap Stock vs. Value Fund Value
Performance |
Timeline |
Small Cap Stock |
Value Fund Value |
Small Cap and Value Fund Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and Value Fund
The main advantage of trading using opposite Small Cap and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Value 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 Value Fund will offset losses from the drop in Value Fund's long position.Small Cap vs. Pnc International Equity | Small Cap vs. Dws Equity Sector | Small Cap vs. Ab Select Equity | Small Cap vs. Franklin Equity Income |
Value Fund vs. Rationalpier 88 Convertible | Value Fund vs. Calamos Dynamic Convertible | Value Fund vs. Advent Claymore Convertible | Value Fund vs. Columbia Convertible Securities |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
AI Portfolio Prophet Use AI to generate optimal portfolios and find profitable investment opportunities |