Correlation Between Smallcap Fund and International Equity
Can any of the company-specific risk be diversified away by investing in both Smallcap Fund and International Equity 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 Fund and International Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Fund Fka and International Equity Index, you can compare the effects of market volatilities on Smallcap Fund and International Equity 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 Fund with a short position of International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Fund and International Equity.
Diversification Opportunities for Smallcap Fund and International Equity
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Smallcap and International is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Fund Fka and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity and Smallcap Fund 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 Fund Fka are associated (or correlated) with International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Smallcap Fund i.e., Smallcap Fund and International Equity go up and down completely randomly.
Pair Corralation between Smallcap Fund and International Equity
Assuming the 90 days horizon Smallcap Fund Fka is expected to generate 1.46 times more return on investment than International Equity. However, Smallcap Fund is 1.46 times more volatile than International Equity Index. It trades about -0.01 of its potential returns per unit of risk. International Equity Index is currently generating about -0.19 per unit of risk. If you would invest 2,590 in Smallcap Fund Fka on October 9, 2024 and sell it today you would lose (27.00) from holding Smallcap Fund Fka or give up 1.04% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Smallcap Fund Fka vs. International Equity Index
Performance |
Timeline |
Smallcap Fund Fka |
International Equity |
Smallcap Fund and International Equity Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Smallcap Fund and International Equity
The main advantage of trading using opposite Smallcap Fund and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Fund position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.Smallcap Fund vs. Strategic Asset Management | Smallcap Fund vs. Strategic Asset Management | Smallcap Fund vs. Strategic Asset Management | Smallcap Fund vs. Strategic Asset Management |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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