Correlation Between Grandeur Peak and Smallcap World

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

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

Diversification Opportunities for Grandeur Peak and Smallcap World

0.81

Correlation Coefficient

Grandeur Peak  Smallcap World

Very poor diversification

The 3 months correlation between Grandeur and Smallcap is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Grandeur Peak Global and Smallcap World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap World and Grandeur Peak 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 Grandeur Peak Global are associated (or correlated) with Smallcap World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap World has no effect on the direction of Grandeur Peak i.e., Grandeur Peak and Smallcap World go up and down completely randomly.

Pair Corralation between Grandeur Peak and Smallcap World

Assuming the 90 days horizon Grandeur Peak Global is expected to generate 1.03 times more return on investment than Smallcap World. However, Grandeur Peak is 1.03 times more volatile than Smallcap World Fund. It trades about -0.19 of its potential returns per unit of risk. Smallcap World Fund is currently generating about -0.33 per unit of risk. If you would invest  1,657  in Grandeur Peak Global on October 9, 2024 and sell it today you would lose (52.00) from holding Grandeur Peak Global or give up 3.14% of portfolio value over 90 days.

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

Grandeur Peak Global  vs.  Smallcap World Fund

Grandeur Peak Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Smallcap World

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Grandeur Peak and Smallcap World

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

The idea behind Grandeur Peak Global and Smallcap World Fund 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.