Correlation Between Small Cap and SCOR PK

Can any of the company-specific risk be diversified away by investing in both Small Cap and SCOR PK 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 Small Cap and SCOR PK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Small Cap Core and SCOR PK, you can compare the effects of market volatilities on Small Cap and SCOR PK 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 Small Cap with a short position of SCOR PK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and SCOR PK.

Diversification Opportunities for Small Cap and SCOR PK

-0.72

Correlation Coefficient

Small Cap  SCOR PK

Pay attention - limited upside

The 3 months correlation between Small and SCOR is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and SCOR PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOR PK and Small Cap 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 Small Cap Core are associated (or correlated) with SCOR PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOR PK has no effect on the direction of Small Cap i.e., Small Cap and SCOR PK go up and down completely randomly.

Pair Corralation between Small Cap and SCOR PK

Assuming the 90 days horizon Small Cap Core is expected to under-perform the SCOR PK. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Core is 2.49 times less risky than SCOR PK. The mutual fund trades about -0.12 of its potential returns per unit of risk. The SCOR PK is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  244.00  in SCOR PK on December 28, 2024 and sell it today you would earn a total of  46.00  from holding SCOR PK or generate 18.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Small Cap Core  vs.  SCOR PK

Small Cap Core

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Core 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.

SCOR PK

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SCOR PK are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, SCOR PK showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small Cap and SCOR PK

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

The idea behind Small Cap Core and SCOR PK 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.