Correlation Between Sp Midcap and Long Term

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

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

Diversification Opportunities for Sp Midcap and Long Term

-0.25

Correlation Coefficient

Sp Midcap  Long Term

Very good diversification

The 3 months correlation between SPMIX and Long is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index and Long Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long Term Government and Sp Midcap 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 Sp Midcap Index are associated (or correlated) with Long Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long Term Government has no effect on the direction of Sp Midcap i.e., Sp Midcap and Long Term go up and down completely randomly.

Pair Corralation between Sp Midcap and Long Term

Assuming the 90 days horizon Sp Midcap Index is expected to under-perform the Long Term. In addition to that, Sp Midcap is 1.42 times more volatile than Long Term Government Fund. It trades about -0.09 of its total potential returns per unit of risk. Long Term Government Fund is currently generating about 0.08 per unit of volatility. If you would invest  1,365  in Long Term Government Fund on December 19, 2024 and sell it today you would earn a total of  48.00  from holding Long Term Government Fund or generate 3.52% return on investment over 90 days.

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

Sp Midcap Index  vs.  Long Term Government Fund

Sp Midcap Index

Risk-Adjusted Performance

Very Weak

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

Long Term Government

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Long Term Government Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Long Term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sp Midcap and Long Term

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

The idea behind Sp Midcap Index and Long Term Government Fund 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.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.