Correlation Between Small Cap and SPDR Russell
Can any of the company-specific risk be diversified away by investing in both Small Cap and SPDR Russell 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 SPDR Russell into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Core and SPDR Russell 1000, you can compare the effects of market volatilities on Small Cap and SPDR Russell 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 SPDR Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and SPDR Russell.
Diversification Opportunities for Small Cap and SPDR Russell
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small and SPDR is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Core and SPDR Russell 1000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Russell 1000 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 Core are associated (or correlated) with SPDR Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Russell 1000 has no effect on the direction of Small Cap i.e., Small Cap and SPDR Russell go up and down completely randomly.
Pair Corralation between Small Cap and SPDR Russell
Assuming the 90 days horizon Small Cap is expected to generate 1.76 times less return on investment than SPDR Russell. In addition to that, Small Cap is 1.46 times more volatile than SPDR Russell 1000. It trades about 0.13 of its total potential returns per unit of risk. SPDR Russell 1000 is currently generating about 0.34 per unit of volatility. If you would invest 10,944 in SPDR Russell 1000 on December 29, 2023 and sell it today you would earn a total of 547.00 from holding SPDR Russell 1000 or generate 5.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 95.65% |
Values | Daily Returns |
Small Cap Core vs. SPDR Russell 1000
Performance |
Timeline |
Small Cap Core |
SPDR Russell 1000 |
Small Cap and SPDR Russell Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Small Cap and SPDR Russell
The main advantage of trading using opposite Small Cap and SPDR Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap position performs unexpectedly, SPDR Russell 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 SPDR Russell will offset losses from the drop in SPDR Russell's long position.Small Cap vs. USCF Gold Strategy | Small Cap vs. Ab Global E | Small Cap vs. Ab Global E | Small Cap vs. Ab Global E |
SPDR Russell vs. Northern Lights | SPDR Russell vs. Dimensional International High | SPDR Russell vs. First Trust Exchange Traded | SPDR Russell vs. EA Series Trust |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
Fundamental Analysis View fundamental data based on most recent published financial statements | |
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |