Correlation Between Mid Cap and Strategic Income
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Strategic Income 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 Strategic Income 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 Strategic Income Fund, you can compare the effects of market volatilities on Mid Cap and Strategic Income 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 Strategic Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Strategic Income.
Diversification Opportunities for Mid Cap and Strategic Income
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mid and Strategic is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Strategic Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Income 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 Strategic Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Income has no effect on the direction of Mid Cap i.e., Mid Cap and Strategic Income go up and down completely randomly.
Pair Corralation between Mid Cap and Strategic Income
Assuming the 90 days horizon Mid Cap Value is expected to generate 3.61 times more return on investment than Strategic Income. However, Mid Cap is 3.61 times more volatile than Strategic Income Fund. It trades about 0.34 of its potential returns per unit of risk. Strategic Income Fund is currently generating about 0.13 per unit of risk. If you would invest 1,684 in Mid Cap Value on September 4, 2024 and sell it today you would earn a total of 92.00 from holding Mid Cap Value or generate 5.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Mid Cap Value vs. Strategic Income Fund
Performance |
| Timeline |
| Mid Cap Value |
| Strategic Income |
Mid Cap and Strategic Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Strategic Income
The main advantage of trading using opposite Mid Cap and Strategic Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Strategic Income 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 Strategic Income will offset losses from the drop in Strategic Income's long position.| Mid Cap vs. Mid Cap Value | Mid Cap vs. Equity Growth Fund | Mid Cap vs. Income Growth Fund | Mid Cap vs. Diversified Bond Fund |
| Strategic Income vs. Short Duration Strategic | Strategic Income vs. Short Duration Fund | Strategic Income vs. High Yield Municipal Fund | Strategic Income vs. Emerging Markets Debt |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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