Correlation Between Equity Growth and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Mid Cap 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 Equity Growth and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and Mid Cap Value, you can compare the effects of market volatilities on Equity Growth and Mid Cap 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 Equity Growth with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Mid Cap.
Diversification Opportunities for Equity Growth and Mid Cap
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and Mid is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Mid Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Value and Equity Growth 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 Equity Growth Fund are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Value has no effect on the direction of Equity Growth i.e., Equity Growth and Mid Cap go up and down completely randomly.
Pair Corralation between Equity Growth and Mid Cap
Assuming the 90 days horizon Equity Growth is expected to generate 1.02 times less return on investment than Mid Cap. In addition to that, Equity Growth is 1.05 times more volatile than Mid Cap Value. It trades about 0.18 of its total potential returns per unit of risk. Mid Cap Value is currently generating about 0.19 per unit of volatility. If you would invest 1,708 in Mid Cap Value on August 25, 2024 and sell it today you would earn a total of 58.00 from holding Mid Cap Value or generate 3.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Fund vs. Mid Cap Value
Performance |
| Timeline |
| Equity Growth |
| Mid Cap Value |
Equity Growth and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Mid Cap
The main advantage of trading using opposite Equity Growth and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| Equity Growth vs. Mid Cap Value | Equity Growth vs. Income Growth Fund | Equity Growth vs. Diversified Bond Fund | Equity Growth vs. Emerging Markets Fund |
| Mid Cap vs. Janus Triton Fund | Mid Cap vs. New World Fund | Mid Cap vs. Fidelity Mid Cap | Mid Cap vs. Mfs Value 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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