Correlation Between Small Cap and Barings Us

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

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

Diversification Opportunities for Small Cap and Barings Us

0.35

Correlation Coefficient

Small Cap  Barings Us

Weak diversification

The 3 months correlation between Small and Barings is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value and Barings High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings High Yield 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 Value are associated (or correlated) with Barings Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings High Yield has no effect on the direction of Small Cap i.e., Small Cap and Barings Us go up and down completely randomly.

Pair Corralation between Small Cap and Barings Us

Assuming the 90 days horizon Small Cap is expected to generate 4.63 times less return on investment than Barings Us. In addition to that, Small Cap is 7.52 times more volatile than Barings High Yield. It trades about 0.0 of its total potential returns per unit of risk. Barings High Yield is currently generating about 0.14 per unit of volatility. If you would invest  797.00  in Barings High Yield on October 23, 2024 and sell it today you would earn a total of  14.00  from holding Barings High Yield or generate 1.76% 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 Value  vs.  Barings High Yield

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value 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.

Barings High Yield

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barings High Yield are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Barings Us 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 Barings Us

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

The idea behind Small Cap Value and Barings High Yield 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.