Correlation Between Small-cap Value and Mid-cap Profund

Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Mid-cap Profund 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 Small-cap Value and Mid-cap Profund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Small Cap Value Profund and Mid Cap Profund Mid Cap, you can compare the effects of market volatilities on Small-cap Value and Mid-cap Profund 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 Small-cap Value with a short position of Mid-cap Profund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Mid-cap Profund.

Diversification Opportunities for Small-cap Value and Mid-cap Profund

0.96

Correlation Coefficient

Small-cap Value  Mid-cap Profund

Almost no diversification

The 3 months correlation between Small-cap and Mid-cap is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Mid Cap Profund Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Profund and Small-cap Value 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 Small Cap Value Profund are associated (or correlated) with Mid-cap Profund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Profund has no effect on the direction of Small-cap Value i.e., Small-cap Value and Mid-cap Profund go up and down completely randomly.

Pair Corralation between Small-cap Value and Mid-cap Profund

Assuming the 90 days horizon Small Cap Value Profund is expected to under-perform the Mid-cap Profund. In addition to that, Small-cap Value is 1.04 times more volatile than Mid Cap Profund Mid Cap. It trades about -0.14 of its total potential returns per unit of risk. Mid Cap Profund Mid Cap is currently generating about -0.09 per unit of volatility. If you would invest  12,444  in Mid Cap Profund Mid Cap on December 21, 2024 and sell it today you would lose (704.00) from holding Mid Cap Profund Mid Cap or give up 5.66% of portfolio value over 90 days.

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

Small Cap Value Profund  vs.  Mid Cap Profund Mid Cap

Small Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Value Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Mid Cap Profund

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Small-cap Value and Mid-cap Profund

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

The idea behind Small Cap Value Profund and Mid Cap Profund Mid Cap 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.