Correlation Between Midcap Fund and Strategic Asset

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

By analyzing existing cross correlation between Midcap Fund R 1 and Strategic Asset Management, you can compare the effects of market volatilities on Midcap Fund and Strategic Asset 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 Strategic Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Fund and Strategic Asset.

Diversification Opportunities for Midcap Fund and Strategic Asset

0.7

Correlation Coefficient

Midcap Fund  Strategic Asset

Poor diversification

The 3 months correlation between Midcap and Strategic is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund R 1 and Strategic Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Asset Mana 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 R 1 are associated (or correlated) with Strategic Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Asset Mana has no effect on the direction of Midcap Fund i.e., Midcap Fund and Strategic Asset go up and down completely randomly.

Pair Corralation between Midcap Fund and Strategic Asset

Assuming the 90 days horizon Midcap Fund R 1 is expected to generate 2.06 times more return on investment than Strategic Asset. However, Midcap Fund is 2.06 times more volatile than Strategic Asset Management. It trades about 0.21 of its potential returns per unit of risk. Strategic Asset Management is currently generating about 0.11 per unit of risk. If you would invest  3,759  in Midcap Fund R 1 on September 18, 2024 and sell it today you would earn a total of  338.00  from holding Midcap Fund R 1 or generate 8.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	79.37%
Values	Daily Returns

Midcap Fund R 1  vs.  Strategic Asset Management

Midcap Fund R

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Midcap Fund R 1 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak fundamental drivers, Midcap Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Strategic Asset Mana

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Asset Management are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Strategic Asset 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 Strategic Asset

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

The idea behind Midcap Fund R 1 and Strategic Asset Management 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.