Correlation Between Small Cap and Doubleline Core

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

By analyzing existing cross correlation between Small Cap Equity and Doubleline E Fixed, you can compare the effects of market volatilities on Small Cap and Doubleline Core 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 Doubleline Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Doubleline Core.

Diversification Opportunities for Small Cap and Doubleline Core

-0.73

Correlation Coefficient

Small Cap  Doubleline Core

Pay attention - limited upside

The 3 months correlation between Small and DOUBLELINE is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Doubleline E Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Doubleline E Fixed 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 Equity are associated (or correlated) with Doubleline Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Doubleline E Fixed has no effect on the direction of Small Cap i.e., Small Cap and Doubleline Core go up and down completely randomly.

Pair Corralation between Small Cap and Doubleline Core

Assuming the 90 days horizon Small Cap Equity is expected to under-perform the Doubleline Core. In addition to that, Small Cap is 4.06 times more volatile than Doubleline E Fixed. It trades about -0.09 of its total potential returns per unit of risk. Doubleline E Fixed is currently generating about 0.14 per unit of volatility. If you would invest  907.00  in Doubleline E Fixed on December 30, 2024 and sell it today you would earn a total of  22.00  from holding Doubleline E Fixed or generate 2.43% return on investment over 90 days.

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

Small Cap Equity  vs.  Doubleline E Fixed

Small Cap Equity

Risk-Adjusted Performance

Very Weak

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

Doubleline E Fixed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Doubleline E Fixed are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Doubleline Core 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 Doubleline Core

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

The idea behind Small Cap Equity and Doubleline E Fixed 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.