Correlation Between Smallcap World and Manning Napier

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

By analyzing existing cross correlation between Smallcap World Fund and Manning Napier Overseas, you can compare the effects of market volatilities on Smallcap World and Manning Napier 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 Smallcap World with a short position of Manning Napier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Manning Napier.

Diversification Opportunities for Smallcap World and Manning Napier

-0.19

Correlation Coefficient

Smallcap World  Manning Napier

Good diversification

The 3 months correlation between Smallcap and Manning is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Manning Napier Overseas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manning Napier Overseas and Smallcap World 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 Smallcap World Fund are associated (or correlated) with Manning Napier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manning Napier Overseas has no effect on the direction of Smallcap World i.e., Smallcap World and Manning Napier go up and down completely randomly.

Pair Corralation between Smallcap World and Manning Napier

Assuming the 90 days horizon Smallcap World Fund is expected to under-perform the Manning Napier. In addition to that, Smallcap World is 1.18 times more volatile than Manning Napier Overseas. It trades about -0.07 of its total potential returns per unit of risk. Manning Napier Overseas is currently generating about 0.14 per unit of volatility. If you would invest  3,249  in Manning Napier Overseas on December 22, 2024 and sell it today you would earn a total of  233.00  from holding Manning Napier Overseas or generate 7.17% return on investment over 90 days.

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

Smallcap World Fund  vs.  Manning Napier Overseas

Smallcap World

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smallcap World Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Smallcap World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Manning Napier Overseas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Manning Napier Overseas are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Manning Napier may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Smallcap World and Manning Napier

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

The idea behind Smallcap World Fund and Manning Napier Overseas 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.