Correlation Between Msvif Mid and Inverse Government

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

By analyzing existing cross correlation between Msvif Mid Cap and Inverse Government Long, you can compare the effects of market volatilities on Msvif Mid and Inverse Government 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 Msvif Mid with a short position of Inverse Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of Msvif Mid and Inverse Government.

Diversification Opportunities for Msvif Mid and Inverse Government

-0.03

Correlation Coefficient

Msvif Mid  Inverse Government

Good diversification

The 3 months correlation between Msvif and Inverse is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Msvif Mid Cap and Inverse Government Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Government Long and Msvif Mid 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 Msvif Mid Cap are associated (or correlated) with Inverse Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Government Long has no effect on the direction of Msvif Mid i.e., Msvif Mid and Inverse Government go up and down completely randomly.

Pair Corralation between Msvif Mid and Inverse Government

Assuming the 90 days horizon Msvif Mid Cap is expected to generate 1.96 times more return on investment than Inverse Government. However, Msvif Mid is 1.96 times more volatile than Inverse Government Long. It trades about 0.08 of its potential returns per unit of risk. Inverse Government Long is currently generating about 0.06 per unit of risk. If you would invest  303.00  in Msvif Mid Cap on October 11, 2024 and sell it today you would earn a total of  284.00  from holding Msvif Mid Cap or generate 93.73% return on investment over 90 days.

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

Msvif Mid Cap  vs.  Inverse Government Long

Msvif Mid Cap

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Msvif Mid Cap are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Msvif Mid showed solid returns over the last few months and may actually be approaching a breakup point.

Inverse Government Long

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Government Long are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Inverse Government may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Msvif Mid and Inverse Government

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

The idea behind Msvif Mid Cap and Inverse Government Long 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.