Correlation Between Small-cap Value and Wcm Focused

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

By analyzing existing cross correlation between Small Cap Value Series and Wcm Focused Emerging, you can compare the effects of market volatilities on Small-cap Value and Wcm Focused 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 Value with a short position of Wcm Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Wcm Focused.

Diversification Opportunities for Small-cap Value and Wcm Focused

0.66

Correlation Coefficient

Small-cap Value  Wcm Focused

Poor diversification

The 3 months correlation between Small-cap and Wcm is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Series and Wcm Focused Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wcm Focused Emerging and Small-cap Value 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 Value Series are associated (or correlated) with Wcm Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wcm Focused Emerging has no effect on the direction of Small-cap Value i.e., Small-cap Value and Wcm Focused go up and down completely randomly.

Pair Corralation between Small-cap Value and Wcm Focused

Assuming the 90 days horizon Small-cap Value is expected to generate 1.84 times less return on investment than Wcm Focused. In addition to that, Small-cap Value is 1.43 times more volatile than Wcm Focused Emerging. It trades about 0.03 of its total potential returns per unit of risk. Wcm Focused Emerging is currently generating about 0.07 per unit of volatility. If you would invest  1,263  in Wcm Focused Emerging on October 9, 2024 and sell it today you would earn a total of  199.00  from holding Wcm Focused Emerging or generate 15.76% return on investment over 90 days.

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

Small Cap Value Series  vs.  Wcm Focused Emerging

Small Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Value Series has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Wcm Focused Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wcm Focused Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Wcm Focused 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 Value and Wcm Focused

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

The idea behind Small Cap Value Series and Wcm Focused Emerging 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.