Correlation Between Small Cap and Elfun Government

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

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

Diversification Opportunities for Small Cap and Elfun Government

0.0

Correlation Coefficient

Small Cap  Elfun Government

Pay attention - limited upside

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

Pair Corralation between Small Cap and Elfun Government

If you would invest  1,327  in Small Cap Stock on October 23, 2024 and sell it today you would earn a total of  29.00  from holding Small Cap Stock or generate 2.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Small Cap Stock  vs.  Elfun Government Money

Small Cap Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

Elfun Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elfun Government Money has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Elfun 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 Small Cap and Elfun Government

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

The idea behind Small Cap Stock and Elfun 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.