Correlation Between Small-cap Value and Falling Us

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

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

Diversification Opportunities for Small-cap Value and Falling Us

-0.83

Correlation Coefficient

Small-cap Value  Falling Us

Pay attention - limited upside

The 3 months correlation between Small-cap and Falling is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Falling Dollar Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falling Dollar Profund and Small-cap Value 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 Value Profund are associated (or correlated) with Falling Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falling Dollar Profund has no effect on the direction of Small-cap Value i.e., Small-cap Value and Falling Us go up and down completely randomly.

Pair Corralation between Small-cap Value and Falling Us

Assuming the 90 days horizon Small Cap Value Profund is expected to generate 2.15 times more return on investment than Falling Us. However, Small-cap Value is 2.15 times more volatile than Falling Dollar Profund. It trades about 0.5 of its potential returns per unit of risk. Falling Dollar Profund is currently generating about -0.22 per unit of risk. If you would invest  6,800  in Small Cap Value Profund on February 18, 2025 and sell it today you would earn a total of  979.00  from holding Small Cap Value Profund or generate 14.4% return on investment over 90 days.

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

Small Cap Value Profund  vs.  Falling Dollar Profund

Small Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Value Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Falling Dollar Profund

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Falling Dollar Profund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Falling Us 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 Value and Falling Us

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

The idea behind Small Cap Value Profund and Falling Dollar 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.