Correlation Between Global Social and Small Cap

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

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

Diversification Opportunities for Global Social and Small Cap

-0.58

Correlation Coefficient

Global Social  Small Cap

Excellent diversification

The 3 months correlation between Global and Small is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Global Social Awareness and Small Cap Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Special and Global Social 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 Global Social Awareness 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 Special has no effect on the direction of Global Social i.e., Global Social and Small Cap go up and down completely randomly.

Pair Corralation between Global Social and Small Cap

Assuming the 90 days horizon Global Social Awareness is expected to generate 0.59 times more return on investment than Small Cap. However, Global Social Awareness is 1.69 times less risky than Small Cap. It trades about 0.12 of its potential returns per unit of risk. Small Cap Special is currently generating about -0.16 per unit of risk. If you would invest  2,373  in Global Social Awareness on December 29, 2024 and sell it today you would earn a total of  146.00  from holding Global Social Awareness or generate 6.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Global Social Awareness  vs.  Small Cap Special

Global Social Awareness

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Social Awareness are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Social may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Small Cap Special

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Special 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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Global Social and Small Cap

The main advantage of trading using opposite Global Social and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Social 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 Global Social Awareness and Small Cap Special 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.