Correlation Between Global Core and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Global Core and Mid Cap 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 Global Core and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global E Portfolio and Mid Cap Growth, you can compare the effects of market volatilities on Global Core and Mid Cap 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 Global Core with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Core and Mid Cap.
Diversification Opportunities for Global Core and Mid Cap
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and Mid is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Global E Portfolio and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and Global Core 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 Global E Portfolio are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of Global Core i.e., Global Core and Mid Cap go up and down completely randomly.
Pair Corralation between Global Core and Mid Cap
Assuming the 90 days horizon Global Core is expected to generate 2.31 times less return on investment than Mid Cap. But when comparing it to its historical volatility, Global E Portfolio is 1.97 times less risky than Mid Cap. It trades about 0.12 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,422 in Mid Cap Growth on August 28, 2024 and sell it today you would earn a total of 904.00 from holding Mid Cap Growth or generate 63.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global E Portfolio vs. Mid Cap Growth
Performance |
| Timeline |
| Global E Portfolio |
| Mid Cap Growth |
Global Core and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Core and Mid Cap
The main advantage of trading using opposite Global Core and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Core position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| Global Core vs. Ab Bond Inflation | Global Core vs. Aqr Managed Futures | Global Core vs. Arrow Managed Futures | Global Core vs. Ab Bond Inflation |
| Mid Cap vs. Rationalpier 88 Convertible | Mid Cap vs. Lord Abbett Vertible | Mid Cap vs. Absolute Convertible Arbitrage | Mid Cap vs. Franklin Vertible Securities |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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