Correlation Between Barings Active and Small Cap

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

By analyzing existing cross correlation between Barings Active Short and Small Cap Value Profund, you can compare the effects of market volatilities on Barings Active and Small Cap 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 Barings Active with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barings Active and Small Cap.

Diversification Opportunities for Barings Active and Small Cap

0.44

Correlation Coefficient

Barings Active  Small Cap

Very weak diversification

The 3 months correlation between Barings and Small is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Barings Active Short and Small Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value and Barings Active 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 Barings Active Short are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Barings Active i.e., Barings Active and Small Cap go up and down completely randomly.

Pair Corralation between Barings Active and Small Cap

Assuming the 90 days horizon Barings Active Short is expected to generate 0.07 times more return on investment than Small Cap. However, Barings Active Short is 14.32 times less risky than Small Cap. It trades about 0.03 of its potential returns per unit of risk. Small Cap Value Profund is currently generating about 0.0 per unit of risk. If you would invest  923.00  in Barings Active Short on October 6, 2024 and sell it today you would earn a total of  1.00  from holding Barings Active Short or generate 0.11% return on investment over 90 days.

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

Barings Active Short  vs.  Small Cap Value Profund

Barings Active Short

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Active Short are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Barings Active is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Cap Value

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value Profund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Barings Active and Small Cap

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

The idea behind Barings Active Short and Small Cap Value Profund 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.