Correlation Between Mid Cap and Income Growth
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Income Growth 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 Income Growth 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 Income Growth Fund, you can compare the effects of market volatilities on Mid Cap and Income Growth 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 Income Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Income Growth.
Diversification Opportunities for Mid Cap and Income Growth
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and Income is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Income Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Growth 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 Income Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Growth has no effect on the direction of Mid Cap i.e., Mid Cap and Income Growth go up and down completely randomly.
Pair Corralation between Mid Cap and Income Growth
Assuming the 90 days horizon Mid Cap Value is expected to generate 0.92 times more return on investment than Income Growth. However, Mid Cap Value is 1.08 times less risky than Income Growth. It trades about -0.06 of its potential returns per unit of risk. Income Growth Fund is currently generating about -0.07 per unit of risk. If you would invest 1,741 in Mid Cap Value on September 13, 2024 and sell it today you would lose (13.00) from holding Mid Cap Value or give up 0.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Value vs. Income Growth Fund
Performance |
| Timeline |
| Mid Cap Value |
| Income Growth |
Mid Cap and Income Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Income Growth
The main advantage of trading using opposite Mid Cap and Income Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Income Growth 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 Income Growth will offset losses from the drop in Income Growth'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 |
| Income Growth vs. Mid Cap Value | Income Growth vs. Equity Growth Fund | Income Growth vs. Income Growth Fund | Income Growth vs. Diversified Bond 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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