Correlation Between Midcap Fund and Equity Income
Can any of the company-specific risk be diversified away by investing in both Midcap Fund and Equity Income 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 Equity Income 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 Equity Income Fund, you can compare the effects of market volatilities on Midcap Fund and Equity Income 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 Equity Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Fund and Equity Income.
Diversification Opportunities for Midcap Fund and Equity Income
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Midcap and Equity is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Fund Class and Equity Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Income 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 Equity Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Income has no effect on the direction of Midcap Fund i.e., Midcap Fund and Equity Income go up and down completely randomly.
Pair Corralation between Midcap Fund and Equity Income
Assuming the 90 days horizon Midcap Fund Class is expected to generate 1.29 times more return on investment than Equity Income. However, Midcap Fund is 1.29 times more volatile than Equity Income Fund. It trades about 0.16 of its potential returns per unit of risk. Equity Income Fund is currently generating about 0.16 per unit of risk. If you would invest 3,973 in Midcap Fund Class on September 3, 2024 and sell it today you would earn a total of 768.00 from holding Midcap Fund Class or generate 19.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.6% |
| Values | Daily Returns |
Midcap Fund Class vs. Equity Income Fund
Performance |
| Timeline |
| Midcap Fund Class |
| Equity Income |
Midcap Fund and Equity Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Midcap Fund and Equity Income
The main advantage of trading using opposite Midcap Fund and Equity Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Fund position performs unexpectedly, Equity Income 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 Equity Income will offset losses from the drop in Equity Income's long position.| Midcap Fund vs. Jpmorgan Equity Income | Midcap Fund vs. The Hartford Equity | Midcap Fund vs. Scharf Fund Retail | Midcap Fund vs. Cutler Equity |
| Equity Income vs. Gmo Resources | Equity Income vs. Jennison Natural Resources | Equity Income vs. Hennessy Bp Energy | Equity Income vs. Franklin Natural Resources |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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