Correlation Between Mid Cap and Sp Smallcap
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Sp Smallcap 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 Sp Smallcap 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 Sp Smallcap 600, you can compare the effects of market volatilities on Mid Cap and Sp Smallcap 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 Sp Smallcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Sp Smallcap.
Diversification Opportunities for Mid Cap and Sp Smallcap
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mid and RYWAX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Sp Smallcap 600 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Smallcap 600 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 Sp Smallcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Smallcap 600 has no effect on the direction of Mid Cap i.e., Mid Cap and Sp Smallcap go up and down completely randomly.
Pair Corralation between Mid Cap and Sp Smallcap
Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 1.08 times more return on investment than Sp Smallcap. However, Mid Cap is 1.08 times more volatile than Sp Smallcap 600. It trades about 0.23 of its potential returns per unit of risk. Sp Smallcap 600 is currently generating about 0.17 per unit of risk. If you would invest 12,214 in Mid Cap 15x Strategy on September 6, 2024 and sell it today you would earn a total of 2,587 from holding Mid Cap 15x Strategy or generate 21.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 98.44% |
Values | Daily Returns |
Mid Cap 15x Strategy vs. Sp Smallcap 600
Performance |
Timeline |
Mid Cap 15x |
Sp Smallcap 600 |
Mid Cap and Sp Smallcap Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Mid Cap and Sp Smallcap
The main advantage of trading using opposite Mid Cap and Sp Smallcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Sp Smallcap 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 Sp Smallcap will offset losses from the drop in Sp Smallcap's long position.Mid Cap vs. Alger Health Sciences | Mid Cap vs. Health Biotchnology Portfolio | Mid Cap vs. Baron Health Care | Mid Cap vs. Prudential Health Sciences |
Sp Smallcap vs. Sp 500 Pure | Sp Smallcap vs. Sp Midcap 400 | Sp Smallcap vs. Sp Smallcap 600 | Sp Smallcap vs. Sp 500 Pure |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios |