Correlation Between Mid Cap and Focused Dynamic

Can any of the company-specific risk be diversified away by investing in both Mid Cap and Focused Dynamic 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 Focused Dynamic 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 Focused Dynamic Growth, you can compare the effects of market volatilities on Mid Cap and Focused Dynamic 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 Focused Dynamic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Focused Dynamic.

Diversification Opportunities for Mid Cap and Focused Dynamic

-0.26

Correlation Coefficient

Mid Cap  Focused Dynamic

Very good diversification

The 3 months correlation between Mid and Focused is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Focused Dynamic Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focused Dynamic Growth 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 Focused Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focused Dynamic Growth has no effect on the direction of Mid Cap i.e., Mid Cap and Focused Dynamic go up and down completely randomly.

Pair Corralation between Mid Cap and Focused Dynamic

Assuming the 90 days horizon Mid Cap Value is expected to under-perform the Focused Dynamic. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mid Cap Value is 1.02 times less risky than Focused Dynamic. The mutual fund trades about -0.21 of its potential returns per unit of risk. The Focused Dynamic Growth is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,979  in Focused Dynamic Growth on October 10, 2024 and sell it today you would earn a total of  190.00  from holding Focused Dynamic Growth or generate 2.72% return on investment over 90 days.

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

Mid Cap Value  vs.  Focused Dynamic Growth

Mid Cap Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mid Cap Value has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Focused Dynamic Growth

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Focused Dynamic Growth are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Focused Dynamic showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mid Cap and Focused Dynamic

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

The idea behind Mid Cap Value and Focused Dynamic Growth 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.