Correlation Between Crm Small/mid and Vanguard Mid-cap

Can any of the company-specific risk be diversified away by investing in both Crm Small/mid and Vanguard Mid-cap 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 Crm Small/mid and Vanguard Mid-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Crm Smallmid Cap and Vanguard Mid Cap Index, you can compare the effects of market volatilities on Crm Small/mid and Vanguard Mid-cap 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 Crm Small/mid with a short position of Vanguard Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crm Small/mid and Vanguard Mid-cap.

Diversification Opportunities for Crm Small/mid and Vanguard Mid-cap

0.95

Correlation Coefficient

Crm Small/mid  Vanguard Mid-cap

Almost no diversification

The 3 months correlation between Crm and Vanguard is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Crm Smallmid Cap and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap and Crm Small/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 Crm Smallmid Cap are associated (or correlated) with Vanguard Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Crm Small/mid i.e., Crm Small/mid and Vanguard Mid-cap go up and down completely randomly.

Pair Corralation between Crm Small/mid and Vanguard Mid-cap

Assuming the 90 days horizon Crm Small/mid is expected to generate 1.1 times less return on investment than Vanguard Mid-cap. In addition to that, Crm Small/mid is 1.21 times more volatile than Vanguard Mid Cap Index. It trades about 0.06 of its total potential returns per unit of risk. Vanguard Mid Cap Index is currently generating about 0.08 per unit of volatility. If you would invest  25,670  in Vanguard Mid Cap Index on September 3, 2024 and sell it today you would earn a total of  9,557  from holding Vanguard Mid Cap Index or generate 37.23% return on investment over 90 days.

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

Crm Smallmid Cap  vs.  Vanguard Mid Cap Index

Crm Smallmid Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crm Smallmid Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Crm Small/mid may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vanguard Mid Cap

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Mid Cap Index are ranked lower than 21 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Vanguard Mid-cap may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Crm Small/mid and Vanguard Mid-cap

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

The idea behind Crm Smallmid Cap and Vanguard Mid Cap Index 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.