Correlation Between Income Growth and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Income 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 Income 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 Income Growth Fund and Mid Cap Value, you can compare the effects of market volatilities on Income 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 Income Growth with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and Mid Cap.
Diversification Opportunities for Income Growth and Mid Cap
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Income and Mid is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Income 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 Income 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 Income 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 Income Growth i.e., Income Growth and Mid Cap go up and down completely randomly.
Pair Corralation between Income Growth and Mid Cap
Assuming the 90 days horizon Income Growth Fund is expected to generate 0.51 times more return on investment than Mid Cap. However, Income Growth Fund is 1.95 times less risky than Mid Cap. It trades about -0.11 of its potential returns per unit of risk. Mid Cap Value is currently generating about -0.19 per unit of risk. If you would invest 3,930 in Income Growth Fund on October 26, 2024 and sell it today you would lose (120.00) from holding Income Growth Fund or give up 3.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Growth Fund vs. Mid Cap Value
Performance |
| Timeline |
| Income Growth |
| Mid Cap Value |
Income Growth and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Growth and Mid Cap
The main advantage of trading using opposite Income Growth and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income 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.| Income Growth vs. Ultra Fund I | Income Growth vs. Value Fund I | Income Growth vs. Equity Growth Fund | Income Growth vs. International Growth Fund |
| Mid Cap vs. The Gold Bullion | Mid Cap vs. Invesco Gold Special | Mid Cap vs. Vy Goldman Sachs | Mid Cap vs. Fidelity Advisor Gold |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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