Correlation Between Global Technology and Midcap Growth

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

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

Diversification Opportunities for Global Technology and Midcap Growth

0.0

Correlation Coefficient

Global Technology  Midcap Growth

Pay attention - limited upside

The 3 months correlation between Global and Midcap is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Portfolio and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Global Technology 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 Global Technology Portfolio 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 Global Technology i.e., Global Technology and Midcap Growth go up and down completely randomly.

Pair Corralation between Global Technology and Midcap Growth

If you would invest  2,072  in Global Technology Portfolio on October 24, 2024 and sell it today you would earn a total of  141.00  from holding Global Technology Portfolio or generate 6.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.67%
Values	Daily Returns

Global Technology Portfolio  vs.  Midcap Growth Fund

Global Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Technology Portfolio are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Technology may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Midcap Growth

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Global Technology and Midcap Growth

The main advantage of trading using opposite Global Technology and Midcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Technology 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 Global Technology Portfolio 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.