Correlation Between Allianzgi Mid-cap and Sparta Capital

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

By analyzing existing cross correlation between Allianzgi Mid Cap Fund and Sparta Capital, you can compare the effects of market volatilities on Allianzgi Mid-cap and Sparta Capital 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 Allianzgi Mid-cap with a short position of Sparta Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allianzgi Mid-cap and Sparta Capital.

Diversification Opportunities for Allianzgi Mid-cap and Sparta Capital

0.43

Correlation Coefficient

Allianzgi Mid-cap  Sparta Capital

Very weak diversification

The 3 months correlation between Allianzgi and Sparta is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Allianzgi Mid Cap Fund and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Allianzgi Mid-cap 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 Allianzgi Mid Cap Fund are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Allianzgi Mid-cap i.e., Allianzgi Mid-cap and Sparta Capital go up and down completely randomly.

Pair Corralation between Allianzgi Mid-cap and Sparta Capital

Assuming the 90 days horizon Allianzgi Mid Cap Fund is expected to under-perform the Sparta Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, Allianzgi Mid Cap Fund is 10.43 times less risky than Sparta Capital. The mutual fund trades about -0.07 of its potential returns per unit of risk. The Sparta Capital is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1.03  in Sparta Capital on December 30, 2024 and sell it today you would lose (0.92) from holding Sparta Capital or give up 89.32% of portfolio value over 90 days.

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

Allianzgi Mid Cap Fund  vs.  Sparta Capital

Allianzgi Mid Cap

Risk-Adjusted Performance

Very Weak

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

Sparta Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Sparta Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Allianzgi Mid-cap and Sparta Capital

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

The idea behind Allianzgi Mid Cap Fund and Sparta Capital 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.