Correlation Between Smallcap Growth and Six Circles

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

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

Diversification Opportunities for Smallcap Growth and Six Circles

-0.69

Correlation Coefficient

Smallcap Growth  Six Circles

Excellent diversification

The 3 months correlation between Smallcap and Six is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Six Circles Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Six Circles Managed and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Six Circles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Six Circles Managed has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Six Circles go up and down completely randomly.

Pair Corralation between Smallcap Growth and Six Circles

Assuming the 90 days horizon Smallcap Growth Fund is expected to under-perform the Six Circles. In addition to that, Smallcap Growth is 1.46 times more volatile than Six Circles Managed. It trades about -0.12 of its total potential returns per unit of risk. Six Circles Managed is currently generating about 0.16 per unit of volatility. If you would invest  1,289  in Six Circles Managed on December 28, 2024 and sell it today you would earn a total of  124.00  from holding Six Circles Managed or generate 9.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Smallcap Growth Fund  vs.  Six Circles Managed

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 latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Six Circles Managed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Six Circles Managed are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Six Circles may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Smallcap Growth and Six Circles

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

The idea behind Smallcap Growth Fund and Six Circles Managed 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.