Correlation Between Small Cap and Ep Emerging
Can any of the company-specific risk be diversified away by investing in both Small Cap and Ep Emerging 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 Ep Emerging 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 Ep Emerging Markets, you can compare the effects of market volatilities on Small Cap and Ep Emerging 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 Ep Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Ep Emerging.
Diversification Opportunities for Small Cap and Ep Emerging
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small and EPASX is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Stock and Ep Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ep Emerging Markets 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 Ep Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ep Emerging Markets has no effect on the direction of Small Cap i.e., Small Cap and Ep Emerging go up and down completely randomly.
Pair Corralation between Small Cap and Ep Emerging
Assuming the 90 days horizon Small Cap Stock is expected to generate 1.86 times more return on investment than Ep Emerging. However, Small Cap is 1.86 times more volatile than Ep Emerging Markets. It trades about 0.2 of its potential returns per unit of risk. Ep Emerging Markets is currently generating about 0.24 per unit of risk. If you would invest 1,227 in Small Cap Stock on May 31, 2025 and sell it today you would earn a total of 180.00 from holding Small Cap Stock or generate 14.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Stock vs. Ep Emerging Markets
Performance |
| Timeline |
| Small Cap Stock |
| Ep Emerging Markets |
Small Cap and Ep Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Ep Emerging
The main advantage of trading using opposite Small Cap and Ep Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, Ep Emerging 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 Ep Emerging will offset losses from the drop in Ep Emerging's long position.The idea behind Small Cap Stock and Ep Emerging Markets 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.| Ep Emerging vs. Europac International Bond | Ep Emerging vs. Europac International Dividend | Ep Emerging vs. Investment Managers Series | Ep Emerging vs. Europac Gold Fund |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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