Correlation Between Dana Large and Inverse Mid-cap

Can any of the company-specific risk be diversified away by investing in both Dana Large 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 Dana Large 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 Dana Large Cap and Inverse Mid Cap Strategy, you can compare the effects of market volatilities on Dana Large 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 Dana Large with a short position of Inverse Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dana Large and Inverse Mid-cap.

Diversification Opportunities for Dana Large and Inverse Mid-cap

-0.5

Correlation Coefficient

Dana Large  Inverse Mid-cap

Very good diversification

The 3 months correlation between Dana and Inverse is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Dana Large Cap 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 Dana Large 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 Dana Large Cap 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 Dana Large i.e., Dana Large and Inverse Mid-cap go up and down completely randomly.

Pair Corralation between Dana Large and Inverse Mid-cap

Assuming the 90 days horizon Dana Large Cap is expected to under-perform the Inverse Mid-cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dana Large Cap is 1.04 times less risky than Inverse Mid-cap. The mutual fund trades about -0.06 of its potential returns per unit of risk. The Inverse Mid Cap Strategy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,952  in Inverse Mid Cap Strategy on December 28, 2024 and sell it today you would earn a total of  236.00  from holding Inverse Mid Cap Strategy or generate 5.97% return on investment over 90 days.

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

Dana Large Cap  vs.  Inverse Mid Cap Strategy

Dana Large Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dana Large Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Dana Large 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 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Inverse Mid-cap may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dana Large and Inverse Mid-cap

The main advantage of trading using opposite Dana Large and Inverse Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dana Large 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 Dana Large Cap 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.