Correlation Between Mid-cap 15x and Vanguard Mid-cap

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

Diversification Opportunities for Mid-cap 15x and Vanguard Mid-cap

0.9

Correlation Coefficient

Mid-cap 15x  Vanguard Mid-cap

Almost no diversification

The 3 months correlation between Mid-cap and Vanguard is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Vanguard Mid Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Mid Cap 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 Vanguard Mid-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Mid Cap has no effect on the direction of Mid-cap 15x i.e., Mid-cap 15x and Vanguard Mid-cap go up and down completely randomly.

Pair Corralation between Mid-cap 15x and Vanguard Mid-cap

Assuming the 90 days horizon Mid Cap 15x Strategy is expected to under-perform the Vanguard Mid-cap. In addition to that, Mid-cap 15x is 1.71 times more volatile than Vanguard Mid Cap Index. It trades about -0.09 of its total potential returns per unit of risk. Vanguard Mid Cap Index is currently generating about -0.04 per unit of volatility. If you would invest  35,989  in Vanguard Mid Cap Index on December 21, 2024 and sell it today you would lose (756.00) from holding Vanguard Mid Cap Index or give up 2.1% of portfolio value over 90 days.

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

Mid Cap 15x Strategy  vs.  Vanguard Mid Cap Index

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 latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Mid Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mid Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Mid-cap 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 15x and Vanguard Mid-cap

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

The idea behind Mid Cap 15x Strategy and Vanguard Mid Cap Index 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.