Correlation Between Mid Cap and Global Small
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Global Small 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 Small into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Value and Global Small Cap, you can compare the effects of market volatilities on Mid Cap and Global Small 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 Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Global Small.
Diversification Opportunities for Mid Cap and Global Small
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mid and Global is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Global Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Small Cap 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 Value are associated (or correlated) with Global Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Small Cap has no effect on the direction of Mid Cap i.e., Mid Cap and Global Small go up and down completely randomly.
Pair Corralation between Mid Cap and Global Small
Assuming the 90 days horizon Mid Cap is expected to generate 1.63 times less return on investment than Global Small. But when comparing it to its historical volatility, Mid Cap Value is 1.48 times less risky than Global Small. It trades about 0.09 of its potential returns per unit of risk. Global Small Cap is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,625 in Global Small Cap on September 3, 2024 and sell it today you would earn a total of 430.00 from holding Global Small Cap or generate 26.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Value vs. Global Small Cap
Performance |
| Timeline |
| Mid Cap Value |
| Global Small Cap |
Mid Cap and Global Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Global Small
The main advantage of trading using opposite Mid Cap and Global Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Global Small 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 Small will offset losses from the drop in Global Small's long position.| Mid Cap vs. Janus Triton Fund | Mid Cap vs. New World Fund | Mid Cap vs. Fidelity Mid Cap | Mid Cap vs. Mfs Value Fund |
| Global Small vs. Morningstar Aggressive Growth | Global Small vs. T Rowe Price | Global Small vs. Artisan High Income | Global Small vs. Siit High Yield |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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