Correlation Between Lifestyle and Midcap Growth
Can any of the company-specific risk be diversified away by investing in both Lifestyle and Midcap Growth 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 Lifestyle and Midcap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifestyle Ii Moderate and Midcap Growth Fund, you can compare the effects of market volatilities on Lifestyle and Midcap Growth 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 Lifestyle with a short position of Midcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifestyle and Midcap Growth.
Diversification Opportunities for Lifestyle and Midcap Growth
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Lifestyle and MIDCAP is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lifestyle Ii Moderate and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Lifestyle 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 Lifestyle Ii Moderate are associated (or correlated) with Midcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Lifestyle i.e., Lifestyle and Midcap Growth go up and down completely randomly.
Pair Corralation between Lifestyle and Midcap Growth
Assuming the 90 days horizon Lifestyle Ii Moderate is expected to under-perform the Midcap Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Lifestyle Ii Moderate is 3.16 times less risky than Midcap Growth. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Midcap Growth Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 755.00 in Midcap Growth Fund on August 30, 2024 and sell it today you would earn a total of 73.00 from holding Midcap Growth Fund or generate 9.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Lifestyle Ii Moderate vs. Midcap Growth Fund
Performance |
| Timeline |
| Lifestyle Ii Moderate |
| Midcap Growth |
Lifestyle and Midcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifestyle and Midcap Growth
The main advantage of trading using opposite Lifestyle and Midcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifestyle position performs unexpectedly, Midcap Growth 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 Midcap Growth will offset losses from the drop in Midcap Growth's long position.| Lifestyle vs. Hennessy Large Cap | Lifestyle vs. T Rowe Price | Lifestyle vs. Davis Financial Fund | Lifestyle vs. Pimco Capital Sec |
| Midcap Growth vs. Pgim Conservative Retirement | Midcap Growth vs. Saat Moderate Strategy | Midcap Growth vs. Qs Moderate Growth | Midcap Growth vs. Lifestyle Ii Moderate |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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