Correlation Between Mid-cap Value and American Funds
Can any of the company-specific risk be diversified away by investing in both Mid-cap Value and American Funds 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 American Funds 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 American Funds 2040, you can compare the effects of market volatilities on Mid-cap Value and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid-cap Value and American Funds.
Diversification Opportunities for Mid-cap Value and American Funds
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mid-cap and American is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Value Profund and American Funds 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2040 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2040 has no effect on the direction of Mid-cap Value i.e., Mid-cap Value and American Funds go up and down completely randomly.
Pair Corralation between Mid-cap Value and American Funds
Assuming the 90 days horizon Mid Cap Value Profund is expected to generate 2.16 times more return on investment than American Funds. However, Mid-cap Value is 2.16 times more volatile than American Funds 2040. It trades about 0.22 of its potential returns per unit of risk. American Funds 2040 is currently generating about 0.1 per unit of risk. If you would invest 8,903 in Mid Cap Value Profund on August 29, 2024 and sell it today you would earn a total of 573.00 from holding Mid Cap Value Profund or generate 6.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Value Profund vs. American Funds 2040
Performance |
| Timeline |
| Mid Cap Value |
| American Funds 2040 |
Mid-cap Value and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid-cap Value and American Funds
The main advantage of trading using opposite Mid-cap Value and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid-cap Value position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Mid-cap Value vs. Franklin Natural Resources | Mid-cap Value vs. Hennessy Bp Energy | Mid-cap Value vs. Short Oil Gas | Mid-cap Value vs. Firsthand Alternative Energy |
| American Funds vs. Balanced Fund Investor | American Funds vs. Materials Portfolio Fidelity | American Funds vs. Eic Value Fund | American Funds vs. Ab Global Risk |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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