Correlation Between Us Small and F/m Investments

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

By analyzing existing cross correlation between Us Small Cap and Fm Investments Large, you can compare the effects of market volatilities on Us Small and F/m Investments 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 Us Small with a short position of F/m Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Small and F/m Investments.

Diversification Opportunities for Us Small and F/m Investments

-0.14

Correlation Coefficient

Us Small  F/m Investments

Good diversification

The 3 months correlation between DFSVX and F/m is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Us Small Cap and Fm Investments Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fm Investments Large and Us Small 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 Us Small Cap are associated (or correlated) with F/m Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fm Investments Large has no effect on the direction of Us Small i.e., Us Small and F/m Investments go up and down completely randomly.

Pair Corralation between Us Small and F/m Investments

Assuming the 90 days horizon Us Small Cap is expected to under-perform the F/m Investments. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Small Cap is 1.15 times less risky than F/m Investments. The mutual fund trades about -0.34 of its potential returns per unit of risk. The Fm Investments Large is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest  1,789  in Fm Investments Large on December 5, 2024 and sell it today you would lose (123.00) from holding Fm Investments Large or give up 6.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Us Small Cap  vs.  Fm Investments Large

Us Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Us Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Fm Investments Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fm Investments Large has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Us Small and F/m Investments

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

The idea behind Us Small Cap and Fm Investments Large 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.