Correlation Between Fulcrum Diversified and Midcap Growth

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

By analyzing existing cross correlation between Fulcrum Diversified Absolute and Midcap Growth Fund, you can compare the effects of market volatilities on Fulcrum Diversified and Midcap Growth 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 Fulcrum Diversified with a short position of Midcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Midcap Growth.

Diversification Opportunities for Fulcrum Diversified and Midcap Growth

-0.29

Correlation Coefficient

Fulcrum Diversified  Midcap Growth

Very good diversification

The 3 months correlation between Fulcrum and Midcap is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Midcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Midcap Growth go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Midcap Growth

Assuming the 90 days horizon Fulcrum Diversified is expected to generate 792.86 times less return on investment than Midcap Growth. But when comparing it to its historical volatility, Fulcrum Diversified Absolute is 2.62 times less risky than Midcap Growth. It trades about 0.0 of its potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.55 of returns per unit of risk over similar time horizon. If you would invest  1,107  in Midcap Growth Fund on October 7, 2024 and sell it today you would earn a total of  95.00  from holding Midcap Growth Fund or generate 8.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.59%
Values	Daily Returns

Fulcrum Diversified Absolute  vs.  Midcap Growth Fund

Fulcrum Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

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

Midcap Growth

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Midcap Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Midcap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fulcrum Diversified and Midcap Growth

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

The idea behind Fulcrum Diversified Absolute and Midcap Growth Fund 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.