Correlation Between At Mid and At Equity

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

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

Diversification Opportunities for At Mid and At Equity

0.81

Correlation Coefficient

At Mid  At Equity

Very poor diversification

The 3 months correlation between AWMIX and AWYIX is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding At Mid Cap and At Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on At Equity Income and At Mid 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 At Mid Cap are associated (or correlated) with At Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of At Equity Income has no effect on the direction of At Mid i.e., At Mid and At Equity go up and down completely randomly.

Pair Corralation between At Mid and At Equity

Assuming the 90 days horizon At Mid Cap is expected to under-perform the At Equity. In addition to that, At Mid is 1.5 times more volatile than At Equity Income. It trades about -0.05 of its total potential returns per unit of risk. At Equity Income is currently generating about -0.03 per unit of volatility. If you would invest  5,891  in At Equity Income on December 28, 2024 and sell it today you would lose (101.00) from holding At Equity Income or give up 1.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

At Mid Cap  vs.  At Equity Income

At Mid Cap

Risk-Adjusted Performance

Very Weak

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

At Equity Income

Risk-Adjusted Performance

Very Weak

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

Pair Trading with At Mid and At Equity

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

The idea behind At Mid Cap and At Equity Income 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.