Correlation Between Mid Cap and Global Opportunity
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Global 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 Global 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 Global Opportunity Portfolio, you can compare the effects of market volatilities on Mid Cap and Global 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 Global Opportunity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Global Opportunity.
Diversification Opportunities for Mid Cap and Global Opportunity
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and GLOBAL is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Global Opportunity Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global 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 Global Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Opportunity has no effect on the direction of Mid Cap i.e., Mid Cap and Global Opportunity go up and down completely randomly.
Pair Corralation between Mid Cap and Global Opportunity
Assuming the 90 days horizon Mid Cap Growth is expected to generate 3.05 times more return on investment than Global Opportunity. However, Mid Cap is 3.05 times more volatile than Global Opportunity Portfolio. It trades about 0.45 of its potential returns per unit of risk. Global Opportunity Portfolio is currently generating about 0.42 per unit of risk. If you would invest 1,888 in Mid Cap Growth on September 1, 2024 and sell it today you would earn a total of 393.00 from holding Mid Cap Growth or generate 20.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Mid Cap Growth vs. Global Opportunity Portfolio
Performance |
| Timeline |
| Mid Cap Growth |
| Global Opportunity |
Mid Cap and Global Opportunity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Global Opportunity
The main advantage of trading using opposite Mid Cap and Global Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Global 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 Global Opportunity will offset losses from the drop in Global 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 |
| Global Opportunity vs. Emerging Markets Equity | Global Opportunity vs. Global Fixed Income | Global Opportunity vs. Global Fixed Income | Global Opportunity vs. Global Fixed Income |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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