Correlation Between Mid Cap and International Opportunity
Can any of the company-specific risk be diversified away by investing in both Mid Cap and International Opportunity 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 International Opportunity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Growth and International Opportunity Portfolio, you can compare the effects of market volatilities on Mid Cap and International Opportunity 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 International Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and International Opportunity.
Diversification Opportunities for Mid Cap and International Opportunity
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mid and International is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and International Opportunity Port in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Opportunity 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 are associated (or correlated) with International Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Opportunity has no effect on the direction of Mid Cap i.e., Mid Cap and International Opportunity go up and down completely randomly.
Pair Corralation between Mid Cap and International Opportunity
Assuming the 90 days horizon Mid Cap Growth is expected to generate 1.74 times more return on investment than International Opportunity. However, Mid Cap is 1.74 times more volatile than International Opportunity Portfolio. It trades about 0.09 of its potential returns per unit of risk. International Opportunity Portfolio is currently generating about 0.07 per unit of risk. If you would invest 1,316 in Mid Cap Growth on August 31, 2024 and sell it today you would earn a total of 965.00 from holding Mid Cap Growth or generate 73.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Growth vs. International Opportunity Port
Performance |
| Timeline |
| Mid Cap Growth |
| International Opportunity |
Mid Cap and International Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and International Opportunity
The main advantage of trading using opposite Mid Cap and International Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, International Opportunity 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 International Opportunity will offset losses from the drop in International Opportunity's long position.| Mid Cap vs. Growth Portfolio Class | Mid Cap vs. Small Pany Growth | Mid Cap vs. Emerging Markets Portfolio | Mid Cap vs. Morgan Stanley Multi |
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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