Correlation Between Smallcap World and Dws Government

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

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

Diversification Opportunities for Smallcap World and Dws Government

0.0

Correlation Coefficient

Smallcap World  Dws Government

Pay attention - limited upside

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

Pair Corralation between Smallcap World and Dws Government

Assuming the 90 days horizon Smallcap World Fund is expected to generate 0.21 times more return on investment than Dws Government. However, Smallcap World Fund is 4.71 times less risky than Dws Government. It trades about 0.06 of its potential returns per unit of risk. Dws Government Money is currently generating about -0.06 per unit of risk. If you would invest  5,202  in Smallcap World Fund on September 13, 2024 and sell it today you would earn a total of  1,438  from holding Smallcap World Fund or generate 27.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	53.54%
Values	Daily Returns

Smallcap World Fund  vs.  Dws Government Money

Smallcap World

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap World Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Smallcap World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dws Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Smallcap World and Dws Government

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

The idea behind Smallcap World Fund and Dws Government Money 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.