Correlation Between Mid Cap and Vanguard Capital

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

Diversification Opportunities for Mid Cap and Vanguard Capital

0.39

Correlation Coefficient

Mid Cap  Vanguard Capital

Weak diversification

The 3 months correlation between Mid and Vanguard is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Vanguard Capital Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Capital Opp 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 Vanguard Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Capital Opp has no effect on the direction of Mid Cap i.e., Mid Cap and Vanguard Capital go up and down completely randomly.

Pair Corralation between Mid Cap and Vanguard Capital

Assuming the 90 days horizon Mid Cap Growth is expected to generate 0.58 times more return on investment than Vanguard Capital. However, Mid Cap Growth is 1.74 times less risky than Vanguard Capital. It trades about -0.23 of its potential returns per unit of risk. Vanguard Capital Opportunity is currently generating about -0.21 per unit of risk. If you would invest  4,145  in Mid Cap Growth on October 8, 2024 and sell it today you would lose (252.00) from holding Mid Cap Growth or give up 6.08% of portfolio value over 90 days.

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

Mid Cap Growth  vs.  Vanguard Capital Opportunity

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.

Vanguard Capital Opp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Mid Cap Growth and Vanguard Capital Opportunity 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.