Correlation Between International Equity and Midcap Fund

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

By analyzing existing cross correlation between International Equity Index and Midcap Fund R 5, you can compare the effects of market volatilities on International Equity and Midcap Fund 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 International Equity with a short position of Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Midcap Fund.

Diversification Opportunities for International Equity and Midcap Fund

-0.08

Correlation Coefficient

International Equity  Midcap Fund

Good diversification

The 3 months correlation between International and Midcap is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Index and Midcap Fund R 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund R and International Equity 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 International Equity Index are associated (or correlated) with Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund R has no effect on the direction of International Equity i.e., International Equity and Midcap Fund go up and down completely randomly.

Pair Corralation between International Equity and Midcap Fund

Assuming the 90 days horizon International Equity Index is expected to generate 0.83 times more return on investment than Midcap Fund. However, International Equity Index is 1.2 times less risky than Midcap Fund. It trades about 0.16 of its potential returns per unit of risk. Midcap Fund R 5 is currently generating about -0.02 per unit of risk. If you would invest  1,100  in International Equity Index on December 29, 2024 and sell it today you would earn a total of  97.00  from holding International Equity Index or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

International Equity Index  vs.  Midcap Fund R 5

International Equity

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in International Equity Index are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, International Equity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Midcap Fund R

Risk-Adjusted Performance

Very Weak

Over the last 90 days Midcap Fund R 5 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Midcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with International Equity and Midcap Fund

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

The idea behind International Equity Index and Midcap Fund R 5 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.