Correlation Between Mirova Global and Small Cap

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

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

Diversification Opportunities for Mirova Global and Small Cap

0.46

Correlation Coefficient

Mirova Global  Small Cap

Very weak diversification

The 3 months correlation between Mirova and Small is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Mirova Global Green and Small Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Mirova Global 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 Mirova Global Green 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 Growth has no effect on the direction of Mirova Global i.e., Mirova Global and Small Cap go up and down completely randomly.

Pair Corralation between Mirova Global and Small Cap

Assuming the 90 days horizon Mirova Global is expected to generate 1.48 times less return on investment than Small Cap. But when comparing it to its historical volatility, Mirova Global Green is 4.89 times less risky than Small Cap. It trades about 0.05 of its potential returns per unit of risk. Small Cap Growth is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,870  in Small Cap Growth on September 20, 2024 and sell it today you would earn a total of  12.00  from holding Small Cap Growth or generate 0.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Mirova Global Green  vs.  Small Cap Growth

Mirova Global Green

Risk-Adjusted Performance

3 of 100

Insignificant

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

Small Cap Growth

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Small Cap Growth are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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.

Pair Trading with Mirova Global and Small Cap

The main advantage of trading using opposite Mirova Global and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mirova Global 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 Mirova Global Green and Small Cap Growth 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 Transaction History module to view history of all your transactions and understand their impact on performance.