Correlation Between Mid-cap Value and Small-cap Growth
Can any of the company-specific risk be diversified away by investing in both Mid-cap Value and Small-cap Growth 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 Value and Small-cap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Value Profund and Small Cap Growth Profund, you can compare the effects of market volatilities on Mid-cap Value and Small-cap Growth 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 Value with a short position of Small-cap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap Value and Small-cap Growth.
Diversification Opportunities for Mid-cap Value and Small-cap Growth
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Mid-cap and Small-cap is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and Small Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Growth and Mid-cap Value 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 Value Profund are associated (or correlated) with Small-cap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Growth has no effect on the direction of Mid-cap Value i.e., Mid-cap Value and Small-cap Growth go up and down completely randomly.
Pair Corralation between Mid-cap Value and Small-cap Growth
Assuming the 90 days horizon Mid-cap Value is expected to generate 1.21 times less return on investment than Small-cap Growth. But when comparing it to its historical volatility, Mid Cap Value Profund is 1.31 times less risky than Small-cap Growth. It trades about 0.32 of its potential returns per unit of risk. Small Cap Growth Profund is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 11,137 in Small Cap Growth Profund on September 2, 2024 and sell it today you would earn a total of 1,156 from holding Small Cap Growth Profund or generate 10.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Value Profund vs. Small Cap Growth Profund
Performance |
| Timeline |
| Mid Cap Value |
| Small Cap Growth |
Mid-cap Value and Small-cap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid-cap Value and Small-cap Growth
The main advantage of trading using opposite Mid-cap Value and Small-cap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-cap Value position performs unexpectedly, Small-cap Growth 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-cap Growth will offset losses from the drop in Small-cap Growth's long position.| Mid-cap Value vs. Fidelity Real Estate | Mid-cap Value vs. Msif Real Estate | Mid-cap Value vs. Jhancock Real Estate | Mid-cap Value vs. Dunham Real Estate |
| Small-cap Growth vs. Small Cap Value Profund | Small-cap Growth vs. Mid Cap Growth Profund | Small-cap Growth vs. Mid Cap Value Profund | Small-cap Growth vs. Small Cap Profund Small Cap |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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