Correlation Between Mid Cap and Short Term
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Short Term 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 Short Term 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 Short Term Government Fund, you can compare the effects of market volatilities on Mid Cap and Short Term 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 Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Short Term.
Diversification Opportunities for Mid Cap and Short Term
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Mid and Short is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value and Short Term Government Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Government 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 Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Government has no effect on the direction of Mid Cap i.e., Mid Cap and Short Term go up and down completely randomly.
Pair Corralation between Mid Cap and Short Term
Assuming the 90 days horizon Mid Cap Value is expected to under-perform the Short Term. In addition to that, Mid Cap is 22.51 times more volatile than Short Term Government Fund. It trades about -0.25 of its total potential returns per unit of risk. Short Term Government Fund is currently generating about 0.07 per unit of volatility. If you would invest 892.00 in Short Term Government Fund on September 19, 2024 and sell it today you would earn a total of 1.00 from holding Short Term Government Fund or generate 0.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Mid Cap Value vs. Short Term Government Fund
Performance |
| Timeline |
| Mid Cap Value |
| Short Term Government |
Mid Cap and Short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Short Term
The main advantage of trading using opposite Mid Cap and Short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Short Term 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 Short Term will offset losses from the drop in Short Term'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 |
| Short Term vs. Mid Cap Value | Short Term vs. Equity Growth Fund | Short Term vs. Income Growth Fund | Short Term 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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