Correlation Between Mid Cap and Brandes Global

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

By analyzing existing cross correlation between Mid Cap 15x Strategy and Brandes Global Equity, you can compare the effects of market volatilities on Mid Cap and Brandes Global 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 Mid Cap with a short position of Brandes Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Brandes Global.

Diversification Opportunities for Mid Cap and Brandes Global

0.72

Correlation Coefficient

Mid Cap  Brandes Global

Poor diversification

The 3 months correlation between Mid and Brandes is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Brandes Global Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brandes Global Equity and 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 Mid Cap 15x Strategy are associated (or correlated) with Brandes Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brandes Global Equity has no effect on the direction of Mid Cap i.e., Mid Cap and Brandes Global go up and down completely randomly.

Pair Corralation between Mid Cap and Brandes Global

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 1.86 times more return on investment than Brandes Global. However, Mid Cap is 1.86 times more volatile than Brandes Global Equity. It trades about 0.08 of its potential returns per unit of risk. Brandes Global Equity is currently generating about 0.05 per unit of risk. If you would invest  11,274  in Mid Cap 15x Strategy on September 13, 2024 and sell it today you would earn a total of  3,232  from holding Mid Cap 15x Strategy or generate 28.67% return on investment over 90 days.

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

Mid Cap 15x Strategy  vs.  Brandes Global Equity

Mid Cap 15x

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap 15x Strategy are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical indicators, Mid Cap showed solid returns over the last few months and may actually be approaching a breakup point.

Brandes Global Equity

Risk-Adjusted Performance

0 of 100

Modest

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

Pair Trading with Mid Cap and Brandes Global

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

The idea behind Mid Cap 15x Strategy and Brandes Global Equity 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.