Correlation Between Science Technology and Small Cap
Can any of the company-specific risk be diversified away by investing in both Science Technology and 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 Science Technology and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Technology Fund and Small Cap Index, you can compare the effects of market volatilities on Science Technology and 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 Science Technology with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Technology and Small Cap.
Diversification Opportunities for Science Technology and Small Cap
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Science and Small is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Science Technology Fund and Small Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Index and Science Technology 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 Science Technology Fund are associated (or correlated) with 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 Small Cap Index has no effect on the direction of Science Technology i.e., Science Technology and Small Cap go up and down completely randomly.
Pair Corralation between Science Technology and Small Cap
Assuming the 90 days horizon Science Technology is expected to generate 1.11 times less return on investment than Small Cap. But when comparing it to its historical volatility, Science Technology Fund is 1.2 times less risky than Small Cap. It trades about 0.22 of its potential returns per unit of risk. Small Cap Index is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,455 in Small Cap Index on May 30, 2025 and sell it today you would earn a total of 220.00 from holding Small Cap Index or generate 15.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Science Technology Fund vs. Small Cap Index
Performance |
| Timeline |
| Science Technology |
| Small Cap Index |
Science Technology and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Science Technology and Small Cap
The main advantage of trading using opposite Science Technology and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Technology position performs unexpectedly, 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 Small Cap will offset losses from the drop in Small Cap's long position.| Science Technology vs. Yuanbao American Depositary | Science Technology vs. Viewbix Common Stock | Science Technology vs. Datavault AI | Science Technology vs. VivoPower International PLC |
| Small Cap vs. Applied Finance Explorer | Small Cap vs. Mutual Of America | Small Cap vs. Queens Road Small | Small Cap vs. Vanguard Small Cap Value |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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