Correlation Between Mid Cap and New Perspective
Can any of the company-specific risk be diversified away by investing in both Mid Cap and New Perspective 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 New Perspective 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 New Perspective Fund, you can compare the effects of market volatilities on Mid Cap and New Perspective 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 New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and New Perspective.
Diversification Opportunities for Mid Cap and New Perspective
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mid and New is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth Profund and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective 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 Profund are associated (or correlated) with New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Mid Cap i.e., Mid Cap and New Perspective go up and down completely randomly.
Pair Corralation between Mid Cap and New Perspective
Assuming the 90 days horizon Mid Cap Growth Profund is expected to under-perform the New Perspective. In addition to that, Mid Cap is 1.43 times more volatile than New Perspective Fund. It trades about -0.26 of its total potential returns per unit of risk. New Perspective Fund is currently generating about 0.01 per unit of volatility. If you would invest 6,351 in New Perspective Fund on November 28, 2024 and sell it today you would earn a total of 4.00 from holding New Perspective Fund or generate 0.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Growth Profund vs. New Perspective Fund
Performance |
| Timeline |
| Mid Cap Growth |
| New Perspective |
Mid Cap and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and New Perspective
The main advantage of trading using opposite Mid Cap and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective's long position.| Mid Cap vs. Small Cap Growth Profund | Mid Cap vs. Mid Cap Value Profund | Mid Cap vs. Small Cap Value Profund | Mid Cap vs. Mid Cap Profund Mid Cap |
| New Perspective vs. Baillie Gifford Health | New Perspective vs. Blackrock Health Sciences | New Perspective vs. Highland Longshort Healthcare | New Perspective vs. Blackrock Health Sciences |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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