Correlation Between Mid-cap Growth and Regional Bank
Can any of the company-specific risk be diversified away by investing in both Mid-cap Growth and Regional Bank 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 Growth and Regional Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Growth Profund and Regional Bank Fund, you can compare the effects of market volatilities on Mid-cap Growth and Regional Bank 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 Growth with a short position of Regional Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap Growth and Regional Bank.
Diversification Opportunities for Mid-cap Growth and Regional Bank
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid-cap and Regional is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth Profund and Regional Bank Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Bank and Mid-cap Growth 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 Profund are associated (or correlated) with Regional Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Bank has no effect on the direction of Mid-cap Growth i.e., Mid-cap Growth and Regional Bank go up and down completely randomly.
Pair Corralation between Mid-cap Growth and Regional Bank
Assuming the 90 days horizon Mid Cap Growth Profund is expected to generate 0.61 times more return on investment than Regional Bank. However, Mid Cap Growth Profund is 1.65 times less risky than Regional Bank. It trades about 0.29 of its potential returns per unit of risk. Regional Bank Fund is currently generating about 0.11 per unit of risk. If you would invest 10,694 in Mid Cap Growth Profund on October 28, 2024 and sell it today you would earn a total of 486.00 from holding Mid Cap Growth Profund or generate 4.54% 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 Profund vs. Regional Bank Fund
Performance |
| Timeline |
| Mid Cap Growth |
| Regional Bank |
Mid-cap Growth and Regional Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid-cap Growth and Regional Bank
The main advantage of trading using opposite Mid-cap Growth and Regional Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-cap Growth position performs unexpectedly, Regional Bank 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 Regional Bank will offset losses from the drop in Regional Bank's long position.| Mid-cap Growth vs. Small Cap Growth Profund | Mid-cap Growth vs. Mid Cap Value Profund | Mid-cap Growth vs. Small Cap Value Profund | Mid-cap Growth vs. Mid Cap Profund Mid Cap |
| Regional Bank vs. Siit High Yield | Regional Bank vs. Americafirst Monthly Risk On | Regional Bank vs. Artisan High Income | Regional Bank vs. Needham Aggressive Growth |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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