Correlation Between Small-cap Value and Mid-cap 15x
Can any of the company-specific risk be diversified away by investing in both Small-cap Value and Mid-cap 15x 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 Small-cap Value and Mid-cap 15x into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Fund and Mid Cap 15x Strategy, you can compare the effects of market volatilities on Small-cap Value and Mid-cap 15x 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 Small-cap Value with a short position of Mid-cap 15x. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Mid-cap 15x.
Diversification Opportunities for Small-cap Value and Mid-cap 15x
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Small-cap and Mid-cap is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Fund and Mid Cap 15x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 15x and Small-cap Value 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 Small Cap Value Fund are associated (or correlated) with Mid-cap 15x. 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 15x has no effect on the direction of Small-cap Value i.e., Small-cap Value and Mid-cap 15x go up and down completely randomly.
Pair Corralation between Small-cap Value and Mid-cap 15x
Assuming the 90 days horizon Small-cap Value is expected to generate 2.35 times less return on investment than Mid-cap 15x. But when comparing it to its historical volatility, Small Cap Value Fund is 1.21 times less risky than Mid-cap 15x. It trades about 0.11 of its potential returns per unit of risk. Mid Cap 15x Strategy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 13,169 in Mid Cap 15x Strategy on November 3, 2024 and sell it today you would earn a total of 756.00 from holding Mid Cap 15x Strategy or generate 5.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Fund vs. Mid Cap 15x Strategy
Performance |
| Timeline |
| Small Cap Value |
| Mid Cap 15x |
Small-cap Value and Mid-cap 15x Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Mid-cap 15x
The main advantage of trading using opposite Small-cap Value and Mid-cap 15x positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value position performs unexpectedly, Mid-cap 15x 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 15x will offset losses from the drop in Mid-cap 15x's long position.| Small-cap Value vs. Commodities Strategy Fund | Small-cap Value vs. Rbc Emerging Markets | Small-cap Value vs. Artisan Developing World | Small-cap Value vs. Dodge Cox Emerging |
| Mid-cap 15x vs. Multi Manager High Yield | Mid-cap 15x vs. Msift High Yield | Mid-cap 15x vs. Lord Abbett Short | Mid-cap 15x vs. Virtus High Yield |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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