Should You Diversify by Style?
With stock styles often showing divergent performance, investors don't necessarily need to travel overseas to add diversification to their portfolios.
U.S. equity exposure can be broadly segmented by market capitalization (small, mid, and large) and style (value versus growth), as represented by the Morningstar Style Box. Correlations within U.S. equity groups tend to be fairly high, although small-cap stocks tend to have the lowest correlations with the broad market. In our recently published 2022 Diversification Landscape Report, however, we found there can be significant benefits to diversifying a portfolio by investment style.