Correlation Between Mid Cap and High Yield
Can any of the company-specific risk be diversified away by investing in both Mid Cap and High Yield 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 High Yield into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Growth and High Yield Portfolio, you can compare the effects of market volatilities on Mid Cap and High Yield 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 High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and High Yield.
Diversification Opportunities for Mid Cap and High Yield
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and High is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and High Yield Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Portfolio 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 Growth are associated (or correlated) with High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Portfolio has no effect on the direction of Mid Cap i.e., Mid Cap and High Yield go up and down completely randomly.
Pair Corralation between Mid Cap and High Yield
Assuming the 90 days horizon Mid Cap Growth is expected to generate 12.0 times more return on investment than High Yield. However, Mid Cap is 12.0 times more volatile than High Yield Portfolio. It trades about 0.21 of its potential returns per unit of risk. High Yield Portfolio is currently generating about 0.18 per unit of risk. If you would invest 1,255 in Mid Cap Growth on October 26, 2024 and sell it today you would earn a total of 308.00 from holding Mid Cap Growth or generate 24.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Growth vs. High Yield Portfolio
Performance |
| Timeline |
| Mid Cap Growth |
| High Yield Portfolio |
Mid Cap and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and High Yield
The main advantage of trading using opposite Mid Cap and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, High Yield 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 High Yield will offset losses from the drop in High Yield's long position.| Mid Cap vs. Morgan Stanley Multi | Mid Cap vs. Growth Portfolio Class | Mid Cap vs. Small Pany Growth | Mid Cap vs. Blackrock Science Technology |
| High Yield vs. Fidelity Advisor Financial | High Yield vs. Financial Industries Fund | High Yield vs. Davis Financial Fund | High Yield vs. Davis Financial 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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