Correlation Between Mid Cap and Iaadx

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

By analyzing existing cross correlation between Mid Cap Growth and Iaadx, you can compare the effects of market volatilities on Mid Cap and Iaadx 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 Iaadx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Iaadx.

Diversification Opportunities for Mid Cap and Iaadx

-0.1

Correlation Coefficient

Mid Cap  Iaadx

Good diversification

The 3 months correlation between Mid and Iaadx is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Iaadx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iaadx 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 Growth are associated (or correlated) with Iaadx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iaadx has no effect on the direction of Mid Cap i.e., Mid Cap and Iaadx go up and down completely randomly.

Pair Corralation between Mid Cap and Iaadx

Assuming the 90 days horizon Mid Cap Growth is expected to under-perform the Iaadx. In addition to that, Mid Cap is 7.17 times more volatile than Iaadx. It trades about -0.23 of its total potential returns per unit of risk. Iaadx is currently generating about -0.41 per unit of volatility. If you would invest  915.00  in Iaadx on October 8, 2024 and sell it today you would lose (14.00) from holding Iaadx or give up 1.53% of portfolio value over 90 days.

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

Mid Cap Growth  vs.  Iaadx

Mid Cap Growth

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mid Cap may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Iaadx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iaadx has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Iaadx 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 Iaadx

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

The idea behind Mid Cap Growth and Iaadx 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.