Correlation Between Scharf Fund and Midcap Fund

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

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

Diversification Opportunities for Scharf Fund and Midcap Fund

0.95

Correlation Coefficient

Scharf Fund  Midcap Fund

Almost no diversification

The 3 months correlation between Scharf and Midcap is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Scharf Fund Retail and Midcap Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund Institutional and Scharf Fund 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 Scharf Fund Retail are associated (or correlated) with Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund Institutional has no effect on the direction of Scharf Fund i.e., Scharf Fund and Midcap Fund go up and down completely randomly.

Pair Corralation between Scharf Fund and Midcap Fund

Assuming the 90 days horizon Scharf Fund is expected to generate 2.38 times less return on investment than Midcap Fund. But when comparing it to its historical volatility, Scharf Fund Retail is 1.39 times less risky than Midcap Fund. It trades about 0.14 of its potential returns per unit of risk. Midcap Fund Institutional is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4,398  in Midcap Fund Institutional on August 31, 2024 and sell it today you would earn a total of  549.00  from holding Midcap Fund Institutional or generate 12.48% return on investment over 90 days.

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

Scharf Fund Retail  vs.  Midcap Fund Institutional

Scharf Fund Retail

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Scharf Fund Retail are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Scharf Fund is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Midcap Fund Institutional

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Fund Institutional are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Midcap Fund may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Scharf Fund and Midcap Fund

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

The idea behind Scharf Fund Retail and Midcap Fund Institutional 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.