Correlation Between Predex Funds and Midcap Fund

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

By analyzing existing cross correlation between Predex Funds and Midcap Fund R 4, you can compare the effects of market volatilities on Predex Funds 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 Predex Funds with a short position of Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Predex Funds and Midcap Fund.

Diversification Opportunities for Predex Funds and Midcap Fund

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Correlation Coefficient

Predex Funds  Midcap Fund

Pay attention - limited upside

The 3 months correlation between Predex and Midcap is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Predex Funds and Midcap Fund R 4 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund R and Predex Funds 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 Predex Funds 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 Predex Funds i.e., Predex Funds and Midcap Fund go up and down completely randomly.

Pair Corralation between Predex Funds and Midcap Fund

Assuming the 90 days horizon Predex Funds is expected to under-perform the Midcap Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Predex Funds is 2.27 times less risky than Midcap Fund. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Midcap Fund R 4 is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3,209  in Midcap Fund R 4 on October 9, 2024 and sell it today you would earn a total of  1,567  from holding Midcap Fund R 4 or generate 48.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.33%
Values	Daily Returns

Predex Funds  vs.  Midcap Fund R 4

Predex Funds

Risk-Adjusted Performance

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Very Weak

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

Midcap Fund R

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Midcap Fund R 4 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Midcap Fund may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Predex Funds and Midcap Fund

The main advantage of trading using opposite Predex Funds and Midcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Predex Funds 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 Predex Funds and Midcap Fund R 4 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 Global Correlations module to find global opportunities by holding instruments from different markets.