Correlation Between Mid Cap and Walden Midcap

Can any of the company-specific risk be diversified away by investing in both Mid Cap and Walden Midcap 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 Mid Cap and Walden Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mid Cap Value and Walden Midcap Fund, you can compare the effects of market volatilities on Mid Cap and Walden Midcap 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 Mid Cap with a short position of Walden Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Walden Midcap.

Diversification Opportunities for Mid Cap and Walden Midcap

0.63

Correlation Coefficient

Mid Cap  Walden Midcap

Poor diversification

The 3 months correlation between Mid and Walden is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Walden Midcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walden Midcap and Mid 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 Mid Cap Value are associated (or correlated) with Walden Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walden Midcap has no effect on the direction of Mid Cap i.e., Mid Cap and Walden Midcap go up and down completely randomly.

Pair Corralation between Mid Cap and Walden Midcap

Assuming the 90 days horizon Mid Cap Value is expected to generate 0.93 times more return on investment than Walden Midcap. However, Mid Cap Value is 1.07 times less risky than Walden Midcap. It trades about 0.05 of its potential returns per unit of risk. Walden Midcap Fund is currently generating about -0.01 per unit of risk. If you would invest  1,542  in Mid Cap Value on December 28, 2024 and sell it today you would earn a total of  35.00  from holding Mid Cap Value or generate 2.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Mid Cap Value  vs.  Walden Midcap Fund

Mid Cap Value

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid Cap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Walden Midcap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walden Midcap Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Walden Midcap is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mid Cap and Walden Midcap

The main advantage of trading using opposite Mid Cap and Walden Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Walden Midcap 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 Walden Midcap will offset losses from the drop in Walden Midcap's long position.

The idea behind Mid Cap Value and Walden Midcap Fund 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.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.