Correlation Between Real Estate and Smallcap Growth

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

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

Diversification Opportunities for Real Estate and Smallcap Growth

0.0

Correlation Coefficient

Real Estate  Smallcap Growth

Pay attention - limited upside

The 3 months correlation between Real and Smallcap is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Real Estate Securities and Smallcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smallcap Growth and Real Estate 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 Real Estate Securities are associated (or correlated) with Smallcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smallcap Growth has no effect on the direction of Real Estate i.e., Real Estate and Smallcap Growth go up and down completely randomly.

Pair Corralation between Real Estate and Smallcap Growth

If you would invest  2,768  in Real Estate Securities on December 29, 2024 and sell it today you would earn a total of  103.00  from holding Real Estate Securities or generate 3.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Real Estate Securities  vs.  Smallcap Growth Fund

Real Estate Securities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Real Estate Securities are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Real Estate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Smallcap Growth

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Real Estate and Smallcap Growth

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

The idea behind Real Estate Securities and Smallcap Growth 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.