Correlation Between Midcap Fund and Loomis Sayles

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

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

Diversification Opportunities for Midcap Fund and Loomis Sayles

0.84

Correlation Coefficient

Midcap Fund  Loomis Sayles

Very poor diversification

The 3 months correlation between Midcap and Loomis is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Institutional and Loomis Sayles Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loomis Sayles Smallmid and Midcap 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 Midcap Fund Institutional are associated (or correlated) with Loomis Sayles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loomis Sayles Smallmid has no effect on the direction of Midcap Fund i.e., Midcap Fund and Loomis Sayles go up and down completely randomly.

Pair Corralation between Midcap Fund and Loomis Sayles

Assuming the 90 days horizon Midcap Fund Institutional is expected to generate 0.83 times more return on investment than Loomis Sayles. However, Midcap Fund Institutional is 1.2 times less risky than Loomis Sayles. It trades about -0.05 of its potential returns per unit of risk. Loomis Sayles Smallmid is currently generating about -0.08 per unit of risk. If you would invest  4,512  in Midcap Fund Institutional on December 22, 2024 and sell it today you would lose (140.00) from holding Midcap Fund Institutional or give up 3.1% of portfolio value over 90 days.

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

Midcap Fund Institutional  vs.  Loomis Sayles Smallmid

Midcap Fund Institutional

Risk-Adjusted Performance

Very Weak

Over the last 90 days Midcap Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Midcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Loomis Sayles Smallmid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loomis Sayles Smallmid has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Loomis Sayles is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Midcap Fund and Loomis Sayles

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

The idea behind Midcap Fund Institutional and Loomis Sayles Smallmid 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.