Correlation Between Short Term and Small Cap

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

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

Diversification Opportunities for Short Term and Small Cap

0.0

Correlation Coefficient

Short Term  Small Cap

Pay attention - limited upside

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

Pair Corralation between Short Term and Small Cap

If you would invest  10,734  in Small Cap Value Profund on October 6, 2024 and sell it today you would earn a total of  316.00  from holding Small Cap Value Profund or generate 2.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Short Term Investment Trust  vs.  Small Cap Value Profund

Short Term Investment

Risk-Adjusted Performance

0 of 100

Very Weak

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

Small Cap Value

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Value Profund are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Short Term and Small Cap

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

The idea behind Short Term Investment Trust and Small Cap Value Profund 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.