Correlation Between Inverse Mid-cap and Monthly Rebalance

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

By analyzing existing cross correlation between Inverse Mid Cap Strategy and Monthly Rebalance Nasdaq 100, you can compare the effects of market volatilities on Inverse Mid-cap and Monthly Rebalance 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 Inverse Mid-cap with a short position of Monthly Rebalance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Mid-cap and Monthly Rebalance.

Diversification Opportunities for Inverse Mid-cap and Monthly Rebalance

-0.93

Correlation Coefficient

Inverse Mid-cap  Monthly Rebalance

Pay attention - limited upside

The 3 months correlation between Inverse and Monthly is -0.93. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Mid Cap Strategy and Monthly Rebalance Nasdaq 100 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monthly Rebalance and Inverse 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 Inverse Mid Cap Strategy are associated (or correlated) with Monthly Rebalance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monthly Rebalance has no effect on the direction of Inverse Mid-cap i.e., Inverse Mid-cap and Monthly Rebalance go up and down completely randomly.

Pair Corralation between Inverse Mid-cap and Monthly Rebalance

Assuming the 90 days horizon Inverse Mid Cap Strategy is expected to generate 0.38 times more return on investment than Monthly Rebalance. However, Inverse Mid Cap Strategy is 2.63 times less risky than Monthly Rebalance. It trades about 0.12 of its potential returns per unit of risk. Monthly Rebalance Nasdaq 100 is currently generating about -0.1 per unit of risk. If you would invest  3,952  in Inverse Mid Cap Strategy on December 30, 2024 and sell it today you would earn a total of  315.00  from holding Inverse Mid Cap Strategy or generate 7.97% return on investment over 90 days.

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

Inverse Mid Cap Strategy  vs.  Monthly Rebalance Nasdaq 100

Inverse Mid Cap

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Mid Cap Strategy are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Inverse Mid-cap may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Monthly Rebalance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Monthly Rebalance Nasdaq 100 has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Inverse Mid-cap and Monthly Rebalance

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

The idea behind Inverse Mid Cap Strategy and Monthly Rebalance Nasdaq 100 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.