Correlation Between Smallcap World and Pfg Invesco

Can any of the company-specific risk be diversified away by investing in both Smallcap World and Pfg Invesco 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 Pfg Invesco 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 Pfg Invesco Thematic, you can compare the effects of market volatilities on Smallcap World and Pfg Invesco 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 Pfg Invesco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Pfg Invesco.

Diversification Opportunities for Smallcap World and Pfg Invesco

0.9

Correlation Coefficient

Smallcap World  Pfg Invesco

Almost no diversification

The 3 months correlation between Smallcap and Pfg is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Pfg Invesco Thematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pfg Invesco Thematic 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 Pfg Invesco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pfg Invesco Thematic has no effect on the direction of Smallcap World i.e., Smallcap World and Pfg Invesco go up and down completely randomly.

Pair Corralation between Smallcap World and Pfg Invesco

Assuming the 90 days horizon Smallcap World is expected to generate 3.57 times less return on investment than Pfg Invesco. In addition to that, Smallcap World is 1.3 times more volatile than Pfg Invesco Thematic. It trades about 0.01 of its total potential returns per unit of risk. Pfg Invesco Thematic is currently generating about 0.04 per unit of volatility. If you would invest  876.00  in Pfg Invesco Thematic on October 4, 2024 and sell it today you would earn a total of  31.00  from holding Pfg Invesco Thematic or generate 3.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Smallcap World Fund  vs.  Pfg Invesco Thematic

Smallcap World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Smallcap World Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and 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.

Pfg Invesco Thematic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pfg Invesco Thematic has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pfg Invesco 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 Pfg Invesco

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

The idea behind Smallcap World Fund and Pfg Invesco Thematic 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.