Correlation Between Mid-cap Value and Ultraemerging Markets

Can any of the company-specific risk be diversified away by investing in both Mid-cap Value and Ultraemerging Markets 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 Ultraemerging Markets 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 Ultraemerging Markets Profund, you can compare the effects of market volatilities on Mid-cap Value and Ultraemerging Markets 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 Ultraemerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap Value and Ultraemerging Markets.

Diversification Opportunities for Mid-cap Value and Ultraemerging Markets

-0.29

Correlation Coefficient

Mid-cap Value  Ultraemerging Markets

Very good diversification

The 3 months correlation between Mid-cap and Ultraemerging is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and Ultraemerging Markets Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultraemerging Markets 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 Ultraemerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultraemerging Markets has no effect on the direction of Mid-cap Value i.e., Mid-cap Value and Ultraemerging Markets go up and down completely randomly.

Pair Corralation between Mid-cap Value and Ultraemerging Markets

Assuming the 90 days horizon Mid Cap Value Profund is expected to generate 0.45 times more return on investment than Ultraemerging Markets. However, Mid Cap Value Profund is 2.25 times less risky than Ultraemerging Markets. It trades about -0.3 of its potential returns per unit of risk. Ultraemerging Markets Profund is currently generating about -0.14 per unit of risk. If you would invest  9,412  in Mid Cap Value Profund on October 6, 2024 and sell it today you would lose (575.00) from holding Mid Cap Value Profund or give up 6.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Mid Cap Value Profund  vs.  Ultraemerging Markets Profund

Mid Cap Value

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Value Profund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Mid-cap Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ultraemerging Markets

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ultraemerging Markets Profund 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 forward indicators remain fairly strong which may send shares a bit higher in February 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 Ultraemerging Markets

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

The idea behind Mid Cap Value Profund and Ultraemerging Markets Profund 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.