Correlation Between Small Cap and Ms Global

Can any of the company-specific risk be diversified away by investing in both Small Cap and Ms Global 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 Ms Global 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 Ms Global Fixed, you can compare the effects of market volatilities on Small Cap and Ms Global 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 Ms Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Ms Global.

Diversification Opportunities for Small Cap and Ms Global

-0.3

Correlation Coefficient

Small Cap  Ms Global

Very good diversification

The 3 months correlation between Small and MFIRX is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Equity and Ms Global Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ms Global 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 Ms Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ms Global Fixed has no effect on the direction of Small Cap i.e., Small Cap and Ms Global go up and down completely randomly.

Pair Corralation between Small Cap and Ms Global

Assuming the 90 days horizon Small Cap Equity is expected to under-perform the Ms Global. In addition to that, Small Cap is 7.74 times more volatile than Ms Global Fixed. It trades about -0.21 of its total potential returns per unit of risk. Ms Global Fixed is currently generating about 0.2 per unit of volatility. If you would invest  521.00  in Ms Global Fixed on November 28, 2024 and sell it today you would earn a total of  9.00  from holding Ms Global Fixed or generate 1.73% return on investment over 90 days.

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

Small Cap Equity  vs.  Ms Global 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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Ms Global Fixed

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ms Global Fixed are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ms Global 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 Ms Global

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

The idea behind Small Cap Equity and Ms Global 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.