Correlation Between Smallcap World and Pace Small/medium
Can any of the company-specific risk be diversified away by investing in both Smallcap World and Pace Small/medium 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 World and Pace Small/medium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap World Fund and Pace Smallmedium Value, you can compare the effects of market volatilities on Smallcap World and Pace Small/medium 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 World with a short position of Pace Small/medium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap World and Pace Small/medium.
Diversification Opportunities for Smallcap World and Pace Small/medium
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Smallcap and Pace is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap World Fund and Pace Smallmedium Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pace Smallmedium Value and Smallcap World 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 World Fund are associated (or correlated) with Pace Small/medium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pace Smallmedium Value has no effect on the direction of Smallcap World i.e., Smallcap World and Pace Small/medium go up and down completely randomly.
Pair Corralation between Smallcap World and Pace Small/medium
Assuming the 90 days horizon Smallcap World is expected to generate 1.25 times less return on investment than Pace Small/medium. But when comparing it to its historical volatility, Smallcap World Fund is 1.47 times less risky than Pace Small/medium. It trades about 0.19 of its potential returns per unit of risk. Pace Smallmedium Value is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,596 in Pace Smallmedium Value on May 28, 2025 and sell it today you would earn a total of 186.00 from holding Pace Smallmedium Value or generate 11.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Smallcap World Fund vs. Pace Smallmedium Value
Performance |
| Timeline |
| Smallcap World |
| Pace Smallmedium Value |
Smallcap World and Pace Small/medium Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap World and Pace Small/medium
The main advantage of trading using opposite Smallcap World and Pace Small/medium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap World position performs unexpectedly, Pace Small/medium 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 Pace Small/medium will offset losses from the drop in Pace Small/medium's long position.| Smallcap World vs. New World Fund | Smallcap World vs. Washington Mutual Investors | Smallcap World vs. Europacific Growth Fund | Smallcap World vs. New Perspective Fund |
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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