Correlation Between Vest Large and Small Midcap

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

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

Diversification Opportunities for Vest Large and Small Midcap

-0.59

Correlation Coefficient

Vest Large  Small Midcap

Excellent diversification

The 3 months correlation between Vest and Small is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Vest Large Cap and Small Midcap Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Midcap Dividend and Vest 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 Vest Large Cap are associated (or correlated) with Small Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Midcap Dividend has no effect on the direction of Vest Large i.e., Vest Large and Small Midcap go up and down completely randomly.

Pair Corralation between Vest Large and Small Midcap

Assuming the 90 days horizon Vest Large Cap is expected to generate 1.69 times more return on investment than Small Midcap. However, Vest Large is 1.69 times more volatile than Small Midcap Dividend Income. It trades about 0.12 of its potential returns per unit of risk. Small Midcap Dividend Income is currently generating about -0.35 per unit of risk. If you would invest  766.00  in Vest Large Cap on October 9, 2024 and sell it today you would earn a total of  36.00  from holding Vest Large Cap or generate 4.7% return on investment over 90 days.

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

Vest Large Cap  vs.  Small Midcap Dividend Income

Vest Large Cap

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vest Large Cap are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Vest Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Small Midcap Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vest Large and Small Midcap

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

The idea behind Vest Large Cap and Small Midcap Dividend 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.