Correlation Between Aig Government and Midcap Fund

Can any of the company-specific risk be diversified away by investing in both Aig Government and Midcap Fund 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 Aig Government and Midcap Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aig Government Money and Midcap Fund Class, you can compare the effects of market volatilities on Aig Government and Midcap Fund 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 Aig Government with a short position of Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aig Government and Midcap Fund.

Diversification Opportunities for Aig Government and Midcap Fund

0.39

Correlation Coefficient

Aig Government  Midcap Fund

Weak diversification

The 3 months correlation between Aig and Midcap is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Aig Government Money and Midcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund Class and Aig Government 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 Aig Government Money are associated (or correlated) with Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund Class has no effect on the direction of Aig Government i.e., Aig Government and Midcap Fund go up and down completely randomly.

Pair Corralation between Aig Government and Midcap Fund

Assuming the 90 days horizon Aig Government Money is expected to under-perform the Midcap Fund. But the mutual fund apears to be less risky and, when comparing its historical volatility, Aig Government Money is 5.72 times less risky than Midcap Fund. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Midcap Fund Class is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,276  in Midcap Fund Class on December 28, 2024 and sell it today you would lose (4.00) from holding Midcap Fund Class or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Aig Government Money  vs.  Midcap Fund Class

Aig Government Money

Risk-Adjusted Performance

Very Weak

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

Midcap Fund Class

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aig Government and Midcap Fund

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

The idea behind Aig Government Money and Midcap Fund Class 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.