Correlation Between M Large and Catalyst/smh High

Can any of the company-specific risk be diversified away by investing in both M Large and Catalyst/smh High 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 M Large and Catalyst/smh High into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between M Large Cap and Catalystsmh High Income, you can compare the effects of market volatilities on M Large and Catalyst/smh High 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 M Large with a short position of Catalyst/smh High. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Large and Catalyst/smh High.

Diversification Opportunities for M Large and Catalyst/smh High

0.56

Correlation Coefficient

M Large  Catalyst/smh High

Very weak diversification

The 3 months correlation between MTCGX and Catalyst/smh is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding M Large Cap and Catalystsmh High Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystsmh High Income and M Large 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 M Large Cap are associated (or correlated) with Catalyst/smh High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystsmh High Income has no effect on the direction of M Large i.e., M Large and Catalyst/smh High go up and down completely randomly.

Pair Corralation between M Large and Catalyst/smh High

Assuming the 90 days horizon M Large Cap is expected to under-perform the Catalyst/smh High. In addition to that, M Large is 6.62 times more volatile than Catalystsmh High Income. It trades about -0.07 of its total potential returns per unit of risk. Catalystsmh High Income is currently generating about 0.07 per unit of volatility. If you would invest  368.00  in Catalystsmh High Income on October 11, 2024 and sell it today you would earn a total of  4.00  from holding Catalystsmh High Income or generate 1.09% return on investment over 90 days.

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

M Large Cap  vs.  Catalystsmh High Income

M Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Catalystsmh High Income

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystsmh High Income are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Catalyst/smh High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with M Large and Catalyst/smh High

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

The idea behind M Large Cap and Catalystsmh High Income 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.