Correlation Between Mid Cap and California High-yield
Can any of the company-specific risk be diversified away by investing in both Mid Cap and California High-yield 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 California High-yield 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 California High Yield Municipal, you can compare the effects of market volatilities on Mid Cap and California High-yield 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 California High-yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and California High-yield.
Diversification Opportunities for Mid Cap and California High-yield
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Mid and California is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and California High Yield Municipa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California High Yield 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 California High-yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California High Yield has no effect on the direction of Mid Cap i.e., Mid Cap and California High-yield go up and down completely randomly.
Pair Corralation between Mid Cap and California High-yield
Assuming the 90 days horizon Mid Cap Value is expected to generate 2.51 times more return on investment than California High-yield. However, Mid Cap is 2.51 times more volatile than California High Yield Municipal. It trades about 0.07 of its potential returns per unit of risk. California High Yield Municipal is currently generating about 0.09 per unit of risk. If you would invest 1,502 in Mid Cap Value on September 2, 2024 and sell it today you would earn a total of 283.00 from holding Mid Cap Value or generate 18.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Value vs. California High Yield Municipa
Performance |
| Timeline |
| Mid Cap Value |
| California High Yield |
Mid Cap and California High-yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and California High-yield
The main advantage of trading using opposite Mid Cap and California High-yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, California High-yield 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 California High-yield will offset losses from the drop in California High-yield'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 |
| California High-yield vs. Equity Growth Fund | California High-yield vs. Income Growth Fund | California High-yield vs. Diversified Bond Fund | California High-yield vs. Emerging Markets Fund |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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