Correlation Between Small Cap and Msvif Growth

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

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

Diversification Opportunities for Small Cap and Msvif Growth

0.48

Correlation Coefficient

Small Cap  Msvif Growth

Very weak diversification

The 3 months correlation between Small and Msvif is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Msvif Growth Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Msvif Growth Port 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 Stock are associated (or correlated) with Msvif Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Msvif Growth Port has no effect on the direction of Small Cap i.e., Small Cap and Msvif Growth go up and down completely randomly.

Pair Corralation between Small Cap and Msvif Growth

Assuming the 90 days horizon Small Cap Stock is expected to under-perform the Msvif Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Small Cap Stock is 1.2 times less risky than Msvif Growth. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Msvif Growth Port is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,221  in Msvif Growth Port on September 25, 2024 and sell it today you would earn a total of  315.00  from holding Msvif Growth Port or generate 25.8% return on investment over 90 days.

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

Small Cap Stock  vs.  Msvif Growth Port

Small Cap Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Small Cap Stock has generated negative risk-adjusted returns adding no value to fund investors. 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.

Msvif Growth Port

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Msvif Growth Port are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Msvif Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Small Cap and Msvif Growth

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

The idea behind Small Cap Stock and Msvif Growth Port 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.