Correlation Between Small Cap and Dws Government

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

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

Diversification Opportunities for Small Cap and Dws Government

0.0

Correlation Coefficient

Small Cap  Dws Government

Pay attention - limited upside

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

Pair Corralation between Small Cap and Dws Government

If you would invest  1,609  in Small Cap Growth on September 17, 2024 and sell it today you would earn a total of  47.00  from holding Small Cap Growth or generate 2.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Small Cap Growth  vs.  Dws Government Money

Small Cap Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Small Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dws Government Money

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Small Cap Growth and Dws 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.