Correlation Between Midcap Fund and Bridge Builder
Can any of the company-specific risk be diversified away by investing in both Midcap Fund and Bridge Builder 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 Midcap Fund and Bridge Builder into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Midcap Fund Class and Bridge Builder Smallmid, you can compare the effects of market volatilities on Midcap Fund and Bridge Builder 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 Midcap Fund with a short position of Bridge Builder. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Fund and Bridge Builder.
Diversification Opportunities for Midcap Fund and Bridge Builder
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Midcap and Bridge is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Class and Bridge Builder Smallmid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bridge Builder Smallmid and Midcap Fund 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 Midcap Fund Class are associated (or correlated) with Bridge Builder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bridge Builder Smallmid has no effect on the direction of Midcap Fund i.e., Midcap Fund and Bridge Builder go up and down completely randomly.
Pair Corralation between Midcap Fund and Bridge Builder
Assuming the 90 days horizon Midcap Fund is expected to generate 1.16 times less return on investment than Bridge Builder. But when comparing it to its historical volatility, Midcap Fund Class is 1.15 times less risky than Bridge Builder. It trades about 0.43 of its potential returns per unit of risk. Bridge Builder Smallmid is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest 1,566 in Bridge Builder Smallmid on September 1, 2024 and sell it today you would earn a total of 168.00 from holding Bridge Builder Smallmid or generate 10.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Midcap Fund Class vs. Bridge Builder Smallmid
Performance |
| Timeline |
| Midcap Fund Class |
| Bridge Builder Smallmid |
Midcap Fund and Bridge Builder Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Midcap Fund and Bridge Builder
The main advantage of trading using opposite Midcap Fund and Bridge Builder positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Fund position performs unexpectedly, Bridge Builder 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 Bridge Builder will offset losses from the drop in Bridge Builder's long position.| Midcap Fund vs. Strategic Asset Management | Midcap Fund vs. Strategic Asset Management | Midcap Fund vs. Strategic Asset Management | Midcap Fund vs. Strategic Asset Management |
| Bridge Builder vs. Bridge Builder E | Bridge Builder vs. Bridge Builder Large | Bridge Builder vs. Bridge Builder Municipal | Bridge Builder vs. Bridge Builder E |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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