Correlation Between Floating Rate and Small Midcap
Can any of the company-specific risk be diversified away by investing in both Floating Rate and Small Midcap 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 Floating Rate and Small Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Floating Rate Fund and Small Midcap Dividend Income, you can compare the effects of market volatilities on Floating Rate and Small Midcap 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 Floating Rate with a short position of Small Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Floating Rate and Small Midcap.
Diversification Opportunities for Floating Rate and Small Midcap
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Floating and Small is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Floating Rate Fund and Small Midcap Dividend Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Midcap Dividend and Floating Rate 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 Floating Rate Fund are associated (or correlated) with Small Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Midcap Dividend has no effect on the direction of Floating Rate i.e., Floating Rate and Small Midcap go up and down completely randomly.
Pair Corralation between Floating Rate and Small Midcap
Assuming the 90 days horizon Floating Rate Fund is expected to under-perform the Small Midcap. But the mutual fund apears to be less risky and, when comparing its historical volatility, Floating Rate Fund is 18.82 times less risky than Small Midcap. The mutual fund trades about -0.13 of its potential returns per unit of risk. The Small Midcap Dividend Income is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,859 in Small Midcap Dividend Income on November 4, 2024 and sell it today you would earn a total of 56.00 from holding Small Midcap Dividend Income or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Floating Rate Fund vs. Small Midcap Dividend Income
Performance |
| Timeline |
| Floating Rate |
| Small Midcap Dividend |
Floating Rate and Small Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Floating Rate and Small Midcap
The main advantage of trading using opposite Floating Rate and Small Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Floating Rate position performs unexpectedly, Small Midcap 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 Small Midcap will offset losses from the drop in Small Midcap's long position.| Floating Rate vs. Needham Aggressive Growth | Floating Rate vs. Barings High Yield | Floating Rate vs. Chartwell Short Duration | Floating Rate vs. Ab High Income |
| Small Midcap vs. Angel Oak Financial | Small Midcap vs. Mesirow Financial Small | Small Midcap vs. Putnam Global Financials | Small Midcap vs. John Hancock Financial |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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