Correlation Between Rising Rates and Mid-cap Profund

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

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

Diversification Opportunities for Rising Rates and Mid-cap Profund

0.64

Correlation Coefficient

Rising Rates  Mid-cap Profund

Poor diversification

The 3 months correlation between Rising and Mid-cap is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Rising Rates Opportunity and Mid Cap Profund Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Profund and Rising Rates 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 Rising Rates Opportunity are associated (or correlated) with Mid-cap Profund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Profund has no effect on the direction of Rising Rates i.e., Rising Rates and Mid-cap Profund go up and down completely randomly.

Pair Corralation between Rising Rates and Mid-cap Profund

Assuming the 90 days horizon Rising Rates Opportunity is expected to generate 0.89 times more return on investment than Mid-cap Profund. However, Rising Rates Opportunity is 1.12 times less risky than Mid-cap Profund. It trades about -0.04 of its potential returns per unit of risk. Mid Cap Profund Mid Cap is currently generating about -0.07 per unit of risk. If you would invest  3,979  in Rising Rates Opportunity on December 27, 2024 and sell it today you would lose (99.00) from holding Rising Rates Opportunity or give up 2.49% of portfolio value over 90 days.

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

Rising Rates Opportunity  vs.  Mid Cap Profund Mid Cap

Rising Rates Opportunity

Risk-Adjusted Performance

Very Weak

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

Mid Cap Profund

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rising Rates and Mid-cap Profund

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

The idea behind Rising Rates Opportunity and Mid Cap Profund Mid Cap 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.