Correlation Between Mid Cap and The Us

Can any of the company-specific risk be diversified away by investing in both Mid Cap and The Us 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 The Us 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 The Porate Fixed, you can compare the effects of market volatilities on Mid Cap and The Us 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 The Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and The Us.

Diversification Opportunities for Mid Cap and The Us

-0.08

Correlation Coefficient

Mid Cap  The Us

Good diversification

The 3 months correlation between Mid and The is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and The Porate Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porate Fixed 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 The Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porate Fixed has no effect on the direction of Mid Cap i.e., Mid Cap and The Us go up and down completely randomly.

Pair Corralation between Mid Cap and The Us

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to under-perform the The Us. In addition to that, Mid Cap is 5.29 times more volatile than The Porate Fixed. It trades about -0.15 of its total potential returns per unit of risk. The Porate Fixed is currently generating about -0.02 per unit of volatility. If you would invest  886.00  in The Porate Fixed on December 17, 2024 and sell it today you would lose (3.00) from holding The Porate Fixed or give up 0.34% of portfolio value over 90 days.

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

Mid Cap 15x Strategy  vs.  The Porate Fixed

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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Porate Fixed

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Porate Fixed has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, The Us 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 The Us

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

The idea behind Mid Cap 15x Strategy and The Porate Fixed 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.