Correlation Between Small Cap and Simt Large

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

Diversification Opportunities for Small Cap and Simt Large

0.94

Correlation Coefficient

Small Cap  Simt Large

Almost no diversification

The 3 months correlation between Small and Simt is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Simt Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Large Cap 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 Simt Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Large Cap has no effect on the direction of Small Cap i.e., Small Cap and Simt Large go up and down completely randomly.

Pair Corralation between Small Cap and Simt Large

Assuming the 90 days horizon Small Cap Stock is expected to generate 1.6 times more return on investment than Simt Large. However, Small Cap is 1.6 times more volatile than Simt Large Cap. It trades about 0.17 of its potential returns per unit of risk. Simt Large Cap is currently generating about 0.23 per unit of risk. If you would invest  1,244  in Small Cap Stock on May 26, 2025 and sell it today you would earn a total of  157.00  from holding Small Cap Stock or generate 12.62% 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.  Simt Large Cap

Small Cap Stock

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Stock are ranked lower than 13 (%) 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.

Simt Large Cap

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Large Cap are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Simt Large may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Small Cap and Simt Large

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

The idea behind Small Cap Stock and Simt Large Cap 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.