Correlation Between Rising Rates and Short Small-cap
Can any of the company-specific risk be diversified away by investing in both Rising Rates and Short 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 Rising Rates and Short Small-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rising Rates Opportunity and Short Small Cap Profund, you can compare the effects of market volatilities on Rising Rates and Short 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 Rising Rates with a short position of Short Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rising Rates and Short Small-cap.
Diversification Opportunities for Rising Rates and Short Small-cap
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rising and Short is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Rising Rates Opportunity and Short Small Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Small Cap and Rising Rates 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 Rising Rates Opportunity are associated (or correlated) with Short 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 Short Small Cap has no effect on the direction of Rising Rates i.e., Rising Rates and Short Small-cap go up and down completely randomly.
Pair Corralation between Rising Rates and Short Small-cap
Assuming the 90 days horizon Rising Rates Opportunity is expected to under-perform the Short Small-cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Rising Rates Opportunity is 1.78 times less risky than Short Small-cap. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Short Small Cap Profund is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 4,696 in Short Small Cap Profund on August 31, 2025 and sell it today you would lose (275.00) from holding Short Small Cap Profund or give up 5.86% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rising Rates Opportunity vs. Short Small Cap Profund
Performance |
| Timeline |
| Rising Rates Opportunity |
| Short Small Cap |
Rising Rates and Short Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rising Rates and Short Small-cap
The main advantage of trading using opposite Rising Rates and Short Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rising Rates position performs unexpectedly, Short 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 Short Small-cap will offset losses from the drop in Short Small-cap's long position.| Rising Rates vs. Arrow Managed Futures | Rising Rates vs. Siit Emerging Markets | Rising Rates vs. Rbc Emerging Markets | Rising Rates vs. Rational Dividend Capture |
| Short Small-cap vs. Enhanced Large Pany | Short Small-cap vs. The Hartford Growth | Short Small-cap vs. Pnc Balanced Allocation | Short Small-cap vs. Calvert Moderate Allocation |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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