Correlation Between Americafirst Defensive and Inverse Mid-cap

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

By analyzing existing cross correlation between Americafirst Defensive Growth and Inverse Mid Cap Strategy, you can compare the effects of market volatilities on Americafirst Defensive and Inverse 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 Americafirst Defensive with a short position of Inverse Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Americafirst Defensive and Inverse Mid-cap.

Diversification Opportunities for Americafirst Defensive and Inverse Mid-cap

0.62

Correlation Coefficient

Americafirst Defensive  Inverse Mid-cap

Poor diversification

The 3 months correlation between Americafirst and Inverse is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Americafirst Defensive Growth and Inverse Mid Cap Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Mid Cap and Americafirst Defensive 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 Americafirst Defensive Growth are associated (or correlated) with Inverse 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 Inverse Mid Cap has no effect on the direction of Americafirst Defensive i.e., Americafirst Defensive and Inverse Mid-cap go up and down completely randomly.

Pair Corralation between Americafirst Defensive and Inverse Mid-cap

Assuming the 90 days horizon Americafirst Defensive is expected to generate 4.21 times less return on investment than Inverse Mid-cap. But when comparing it to its historical volatility, Americafirst Defensive Growth is 6.19 times less risky than Inverse Mid-cap. It trades about 0.16 of its potential returns per unit of risk. Inverse Mid Cap Strategy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,248  in Inverse Mid Cap Strategy on December 25, 2024 and sell it today you would earn a total of  223.00  from holding Inverse Mid Cap Strategy or generate 6.87% return on investment over 90 days.

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

Americafirst Defensive Growth  vs.  Inverse Mid Cap Strategy

Americafirst Defensive

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Americafirst Defensive Growth are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Americafirst Defensive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Inverse Mid Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Mid Cap Strategy are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Inverse Mid-cap may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Americafirst Defensive and Inverse Mid-cap

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

The idea behind Americafirst Defensive Growth and Inverse Mid Cap Strategy 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.