Correlation Between Small-cap Value and Utilities Ultrasector
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Utilities Ultrasector 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 Value and Utilities Ultrasector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Profund and Utilities Ultrasector Profund, you can compare the effects of market volatilities on Small-cap Value and Utilities Ultrasector 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 Value with a short position of Utilities Ultrasector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Utilities Ultrasector.
Diversification Opportunities for Small-cap Value and Utilities Ultrasector
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Small-cap and Utilities is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Utilities Ultrasector Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Ultrasector and Small-cap Value 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 Value Profund are associated (or correlated) with Utilities Ultrasector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Ultrasector has no effect on the direction of Small-cap Value i.e., Small-cap Value and Utilities Ultrasector go up and down completely randomly.
Pair Corralation between Small-cap Value and Utilities Ultrasector
Assuming the 90 days horizon Small Cap Value Profund is expected to generate 1.07 times more return on investment than Utilities Ultrasector. However, Small-cap Value is 1.07 times more volatile than Utilities Ultrasector Profund. It trades about 0.18 of its potential returns per unit of risk. Utilities Ultrasector Profund is currently generating about 0.07 per unit of risk. If you would invest 7,458 in Small Cap Value Profund on June 1, 2025 and sell it today you would earn a total of 1,103 from holding Small Cap Value Profund or generate 14.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Small Cap Value Profund vs. Utilities Ultrasector Profund
Performance |
| Timeline |
| Small Cap Value |
| Utilities Ultrasector |
Small-cap Value and Utilities Ultrasector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Utilities Ultrasector
The main advantage of trading using opposite Small-cap Value and Utilities Ultrasector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Utilities Ultrasector 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 Utilities Ultrasector will offset losses from the drop in Utilities Ultrasector's long position.| Small-cap Value vs. Short Real Estate | Small-cap Value vs. Short Real Estate | Small-cap Value vs. Ultrashort Mid Cap Profund | Small-cap Value vs. Ultrashort Mid Cap Profund |
| Utilities Ultrasector vs. Short Real Estate | Utilities Ultrasector vs. Short Real Estate | Utilities Ultrasector vs. Ultrashort Mid Cap Profund | Utilities Ultrasector vs. Ultrashort Mid Cap Profund |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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