Correlation Between Mid-cap Value and Boston Partners

Can any of the company-specific risk be diversified away by investing in both Mid-cap Value and Boston Partners 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 Mid-cap Value and Boston Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mid Cap Value Profund and Boston Partners Small, you can compare the effects of market volatilities on Mid-cap Value and Boston Partners 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 Mid-cap Value with a short position of Boston Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap Value and Boston Partners.

Diversification Opportunities for Mid-cap Value and Boston Partners

0.82

Correlation Coefficient

Mid-cap Value  Boston Partners

Very poor diversification

The 3 months correlation between Mid-cap and Boston is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and Boston Partners Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Partners Small and Mid-cap Value 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 Mid Cap Value Profund are associated (or correlated) with Boston Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Partners Small has no effect on the direction of Mid-cap Value i.e., Mid-cap Value and Boston Partners go up and down completely randomly.

Pair Corralation between Mid-cap Value and Boston Partners

Assuming the 90 days horizon Mid Cap Value Profund is expected to generate 0.51 times more return on investment than Boston Partners. However, Mid Cap Value Profund is 1.95 times less risky than Boston Partners. It trades about -0.16 of its potential returns per unit of risk. Boston Partners Small is currently generating about -0.2 per unit of risk. If you would invest  9,360  in Mid Cap Value Profund on December 11, 2024 and sell it today you would lose (885.00) from holding Mid Cap Value Profund or give up 9.46% of portfolio value over 90 days.

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

Mid Cap Value Profund  vs.  Boston Partners Small

Mid Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Value Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Boston Partners Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boston Partners Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Mid-cap Value and Boston Partners

The main advantage of trading using opposite Mid-cap Value and Boston Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-cap Value position performs unexpectedly, Boston Partners 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 Boston Partners will offset losses from the drop in Boston Partners' long position.

The idea behind Mid Cap Value Profund and Boston Partners Small 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.