Correlation Between Growth Portfolio and Small Cap
Can any of the company-specific risk be diversified away by investing in both Growth Portfolio and Small Cap 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 Growth Portfolio and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Portfolio Class and Small Cap Growth, you can compare the effects of market volatilities on Growth Portfolio and Small Cap 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 Growth Portfolio with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Portfolio and Small Cap.
Diversification Opportunities for Growth Portfolio and Small Cap
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Growth and Small is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Growth Portfolio Class and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Growth Portfolio 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 Growth Portfolio Class are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Growth Portfolio i.e., Growth Portfolio and Small Cap go up and down completely randomly.
Pair Corralation between Growth Portfolio and Small Cap
Assuming the 90 days horizon Growth Portfolio Class is expected to generate 1.67 times more return on investment than Small Cap. However, Growth Portfolio is 1.67 times more volatile than Small Cap Growth. It trades about -0.01 of its potential returns per unit of risk. Small Cap Growth is currently generating about -0.11 per unit of risk. If you would invest 5,231 in Growth Portfolio Class on December 2, 2024 and sell it today you would lose (118.00) from holding Growth Portfolio Class or give up 2.26% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Growth Portfolio Class vs. Small Cap Growth
Performance |
Timeline |
Growth Portfolio Class |
Small Cap Growth |
Growth Portfolio and Small Cap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Growth Portfolio and Small Cap
The main advantage of trading using opposite Growth Portfolio and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Portfolio position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.Growth Portfolio vs. Mid Cap Growth | Growth Portfolio vs. Morgan Stanley Multi | Growth Portfolio vs. Small Pany Growth | Growth Portfolio vs. Blackrock Science Technology |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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