Correlation Between Mid-cap 15x and Inverse Russell

Can any of the company-specific risk be diversified away by investing in both Mid-cap 15x and Inverse Russell 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 15x and Inverse Russell 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 Inverse Russell 2000, you can compare the effects of market volatilities on Mid-cap 15x and Inverse Russell 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 15x with a short position of Inverse Russell. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap 15x and Inverse Russell.

Diversification Opportunities for Mid-cap 15x and Inverse Russell

-0.31

Correlation Coefficient

Mid-cap 15x  Inverse Russell

Very good diversification

The 3 months correlation between Mid-cap and Inverse is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Inverse Russell 2000 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Russell 2000 and Mid-cap 15x 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 Inverse Russell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Russell 2000 has no effect on the direction of Mid-cap 15x i.e., Mid-cap 15x and Inverse Russell go up and down completely randomly.

Pair Corralation between Mid-cap 15x and Inverse Russell

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to under-perform the Inverse Russell. But the mutual fund apears to be less risky and, when comparing its historical volatility, Mid Cap 15x Strategy is 27.5 times less risky than Inverse Russell. The mutual fund trades about -0.16 of its potential returns per unit of risk. The Inverse Russell 2000 is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  4,143  in Inverse Russell 2000 on November 28, 2024 and sell it today you would earn a total of  9,955  from holding Inverse Russell 2000 or generate 240.28% return on investment over 90 days.

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

Mid Cap 15x Strategy  vs.  Inverse Russell 2000

Mid Cap 15x

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap 15x Strategy 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 fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Inverse Russell 2000

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inverse Russell 2000 are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Inverse Russell showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mid-cap 15x and Inverse Russell

The main advantage of trading using opposite Mid-cap 15x and Inverse Russell positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-cap 15x position performs unexpectedly, Inverse Russell 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 Inverse Russell will offset losses from the drop in Inverse Russell's long position.

The idea behind Mid Cap 15x Strategy and Inverse Russell 2000 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.