Correlation Between Mid Cap and Global Social

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

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

Diversification Opportunities for Mid Cap and Global Social

-0.53

Correlation Coefficient

Mid Cap  Global Social

Excellent diversification

The 3 months correlation between Mid and Global is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Index and Global Social Awareness in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Social Awareness 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 Index are associated (or correlated) with Global Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Social Awareness has no effect on the direction of Mid Cap i.e., Mid Cap and Global Social go up and down completely randomly.

Pair Corralation between Mid Cap and Global Social

Assuming the 90 days horizon Mid Cap Index is expected to under-perform the Global Social. In addition to that, Mid Cap is 2.34 times more volatile than Global Social Awareness. It trades about -0.13 of its total potential returns per unit of risk. Global Social Awareness is currently generating about 0.13 per unit of volatility. If you would invest  2,373  in Global Social Awareness on December 28, 2024 and sell it today you would earn a total of  167.00  from holding Global Social Awareness or generate 7.04% return on investment over 90 days.

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

Mid Cap Index  vs.  Global Social Awareness

Mid Cap Index

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mid Cap Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Global Social Awareness

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Social Awareness are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Social may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Mid Cap and Global Social

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

The idea behind Mid Cap Index and Global Social Awareness 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.