Correlation Between Midcap Fund and Allianzgi Convertible

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

By analyzing existing cross correlation between Midcap Fund Class and Allianzgi Convertible Income, you can compare the effects of market volatilities on Midcap Fund and Allianzgi Convertible 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 Allianzgi Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Fund and Allianzgi Convertible.

Diversification Opportunities for Midcap Fund and Allianzgi Convertible

-0.1

Correlation Coefficient

Midcap Fund  Allianzgi Convertible

Good diversification

The 3 months correlation between Midcap and Allianzgi is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Class and Allianzgi Convertible Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allianzgi Convertible 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 Class are associated (or correlated) with Allianzgi Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allianzgi Convertible has no effect on the direction of Midcap Fund i.e., Midcap Fund and Allianzgi Convertible go up and down completely randomly.

Pair Corralation between Midcap Fund and Allianzgi Convertible

Assuming the 90 days horizon Midcap Fund Class is expected to under-perform the Allianzgi Convertible. But the mutual fund apears to be less risky and, when comparing its historical volatility, Midcap Fund Class is 37.58 times less risky than Allianzgi Convertible. The mutual fund trades about -0.14 of its potential returns per unit of risk. The Allianzgi Convertible Income is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  408.00  in Allianzgi Convertible Income on November 29, 2024 and sell it today you would earn a total of  1,102  from holding Allianzgi Convertible Income or generate 270.1% return on investment over 90 days.

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

Midcap Fund Class  vs.  Allianzgi Convertible Income

Midcap Fund Class

Risk-Adjusted Performance

Very Weak

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

Allianzgi Convertible

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Allianzgi Convertible Income are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Allianzgi Convertible showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Midcap Fund and Allianzgi Convertible

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

The idea behind Midcap Fund Class and Allianzgi Convertible 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.