Correlation Between Small Cap and Barings Global

Can any of the company-specific risk be diversified away by investing in both Small Cap and Barings Global 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 Barings Global 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 Barings Global Floating, you can compare the effects of market volatilities on Small Cap and Barings Global 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 Barings Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Barings Global.

Diversification Opportunities for Small Cap and Barings Global

-0.19

Correlation Coefficient

Small Cap  Barings Global

Good diversification

The 3 months correlation between Small and Barings is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and Barings Global Floating in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings Global Floating 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 Barings Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings Global Floating has no effect on the direction of Small Cap i.e., Small Cap and Barings Global go up and down completely randomly.

Pair Corralation between Small Cap and Barings Global

Assuming the 90 days horizon Small Cap is expected to generate 1.55 times less return on investment than Barings Global. In addition to that, Small Cap is 7.31 times more volatile than Barings Global Floating. It trades about 0.02 of its total potential returns per unit of risk. Barings Global Floating is currently generating about 0.2 per unit of volatility. If you would invest  728.00  in Barings Global Floating on October 4, 2024 and sell it today you would earn a total of  147.00  from holding Barings Global Floating or generate 20.19% return on investment over 90 days.

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

Small Cap Core  vs.  Barings Global Floating

Small Cap Core

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Barings Global Floating

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barings Global Floating are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Barings Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Small Cap and Barings Global

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

The idea behind Small Cap Core and Barings Global Floating 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.