Correlation Between Smallcap Growth and Glg Intl

Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Glg Intl 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 Smallcap Growth and Glg Intl into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Smallcap Growth and Glg Intl

0.82

Correlation Coefficient

Smallcap Growth  Glg Intl

Very poor diversification

The 3 months correlation between Smallcap and Glg is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Glg Intl Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glg Intl Small and Smallcap Growth 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 Smallcap Growth Fund are associated (or correlated) with Glg Intl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glg Intl Small has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Glg Intl go up and down completely randomly.

Pair Corralation between Smallcap Growth and Glg Intl

Assuming the 90 days horizon Smallcap Growth is expected to generate 1.09 times less return on investment than Glg Intl. In addition to that, Smallcap Growth is 1.15 times more volatile than Glg Intl Small. It trades about 0.08 of its total potential returns per unit of risk. Glg Intl Small is currently generating about 0.1 per unit of volatility. If you would invest  6,905  in Glg Intl Small on September 12, 2024 and sell it today you would earn a total of  1,872  from holding Glg Intl Small or generate 27.11% return on investment over 90 days.

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

Smallcap Growth Fund  vs.  Glg Intl Small

Smallcap Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smallcap Growth Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly abnormal basic indicators, Smallcap Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Glg Intl Small

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Glg Intl Small are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Glg Intl may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Smallcap Growth and Glg Intl

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

The idea behind Smallcap Growth Fund and Glg Intl Small 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.