Correlation Between Sp Smallcap and Shelton Emerging

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

By analyzing existing cross correlation between Sp Smallcap Index and Shelton Emerging Markets, you can compare the effects of market volatilities on Sp Smallcap and Shelton Emerging 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 Sp Smallcap with a short position of Shelton Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Smallcap and Shelton Emerging.

Diversification Opportunities for Sp Smallcap and Shelton Emerging

0.0

Correlation Coefficient

Sp Smallcap  Shelton Emerging

Pay attention - limited upside

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

Pair Corralation between Sp Smallcap and Shelton Emerging

Assuming the 90 days horizon Sp Smallcap Index is expected to generate 1.54 times more return on investment than Shelton Emerging. However, Sp Smallcap is 1.54 times more volatile than Shelton Emerging Markets. It trades about 0.03 of its potential returns per unit of risk. Shelton Emerging Markets is currently generating about -0.02 per unit of risk. If you would invest  2,221  in Sp Smallcap Index on September 3, 2024 and sell it today you would earn a total of  54.00  from holding Sp Smallcap Index or generate 2.43% return on investment over 90 days.

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

Sp Smallcap Index  vs.  Shelton Emerging Markets

Sp Smallcap Index

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sp Smallcap Index are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Sp Smallcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Shelton Emerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shelton Emerging Markets has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong essential indicators, Shelton Emerging is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sp Smallcap and Shelton Emerging

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

The idea behind Sp Smallcap Index and Shelton Emerging Markets 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.