Correlation Between Global Fixed and Small Company
Can any of the company-specific risk be diversified away by investing in both Global Fixed and Small Company 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 Global Fixed and Small Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Fixed Income and Small Pany Growth, you can compare the effects of market volatilities on Global Fixed and Small Company 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 Global Fixed with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Fixed and Small Company.
Diversification Opportunities for Global Fixed and Small Company
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Small is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Global Fixed Income and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Global Fixed 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 Global Fixed Income are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Global Fixed i.e., Global Fixed and Small Company go up and down completely randomly.
Pair Corralation between Global Fixed and Small Company
Assuming the 90 days horizon Global Fixed is expected to generate 3.48 times less return on investment than Small Company. But when comparing it to its historical volatility, Global Fixed Income is 7.78 times less risky than Small Company. It trades about 0.23 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 854.00 in Small Pany Growth on June 3, 2025 and sell it today you would earn a total of 78.00 from holding Small Pany Growth or generate 9.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Fixed Income vs. Small Pany Growth
Performance |
| Timeline |
| Global Fixed Income |
| Small Pany Growth |
Global Fixed and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Fixed and Small Company
The main advantage of trading using opposite Global Fixed and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Fixed position performs unexpectedly, Small Company 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 Company will offset losses from the drop in Small Company's long position.| Global Fixed vs. Intermediate Government Bond | Global Fixed vs. Federated Government Income | Global Fixed vs. Franklin Adjustable Government | Global Fixed vs. Wells Fargo Government |
| Small Company vs. Nomura Real Estate | Small Company vs. Prudential Real Estate | Small Company vs. Great West Real Estate | Small Company vs. Fidelity Real Estate |
Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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