Correlation Between Midcap Fund and One Rock

Can any of the company-specific risk be diversified away by investing in both Midcap Fund and One Rock 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 One Rock 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 One Rock Fund, you can compare the effects of market volatilities on Midcap Fund and One Rock 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 One Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Fund and One Rock.

Diversification Opportunities for Midcap Fund and One Rock

0.55

Correlation Coefficient

Midcap Fund  One Rock

Very weak diversification

The 3 months correlation between Midcap and One is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Institutional and One Rock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Rock Fund 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 One Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Rock Fund has no effect on the direction of Midcap Fund i.e., Midcap Fund and One Rock go up and down completely randomly.

Pair Corralation between Midcap Fund and One Rock

Assuming the 90 days horizon Midcap Fund is expected to generate 2.33 times less return on investment than One Rock. But when comparing it to its historical volatility, Midcap Fund Institutional is 2.15 times less risky than One Rock. It trades about 0.08 of its potential returns per unit of risk. One Rock Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,078  in One Rock Fund on September 28, 2024 and sell it today you would earn a total of  2,395  from holding One Rock Fund or generate 115.26% return on investment over 90 days.

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

Midcap Fund Institutional  vs.  One Rock Fund

Midcap Fund Institutional

Risk-Adjusted Performance

0 of 100

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.

One Rock Fund

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in One Rock Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, One Rock 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 One Rock

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

The idea behind Midcap Fund Institutional and One Rock Fund 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 Commodity Directory module to find actively traded commodities issued by global exchanges.