Correlation Between International Equity and Midcap Value
Can any of the company-specific risk be diversified away by investing in both International Equity and Midcap Value 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 International Equity and Midcap Value into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Index and Midcap Value Fund, you can compare the effects of market volatilities on International Equity and Midcap Value 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 International Equity with a short position of Midcap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Midcap Value.
Diversification Opportunities for International Equity and Midcap Value
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between International and Midcap is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Index and Midcap Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Value and International Equity 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 International Equity Index are associated (or correlated) with Midcap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Value has no effect on the direction of International Equity i.e., International Equity and Midcap Value go up and down completely randomly.
Pair Corralation between International Equity and Midcap Value
Assuming the 90 days horizon International Equity Index is expected to under-perform the Midcap Value. In addition to that, International Equity is 1.03 times more volatile than Midcap Value Fund. It trades about -0.01 of its total potential returns per unit of risk. Midcap Value Fund is currently generating about 0.35 per unit of volatility. If you would invest 1,831 in Midcap Value Fund on September 1, 2024 and sell it today you would earn a total of 117.00 from holding Midcap Value Fund or generate 6.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Equity Index vs. Midcap Value Fund
Performance |
| Timeline |
| International Equity |
| Midcap Value |
International Equity and Midcap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Midcap Value
The main advantage of trading using opposite International Equity and Midcap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity position performs unexpectedly, Midcap Value 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 Midcap Value will offset losses from the drop in Midcap Value's long position.The idea behind International Equity Index and Midcap Value Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Midcap Value vs. Strategic Asset Management | Midcap Value vs. Strategic Asset Management | Midcap Value vs. Strategic Asset Management | Midcap Value vs. Strategic Asset Management |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |