Correlation Between International Small and Midcap Sp
Can any of the company-specific risk be diversified away by investing in both International Small and Midcap Sp 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 Small and Midcap Sp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Small Pany and Midcap Sp 400, you can compare the effects of market volatilities on International Small and Midcap Sp 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 Small with a short position of Midcap Sp. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Small and Midcap Sp.
Diversification Opportunities for International Small and Midcap Sp
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Midcap is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding International Small Pany and Midcap Sp 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Sp 400 and International Small 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 Small Pany are associated (or correlated) with Midcap Sp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Sp 400 has no effect on the direction of International Small i.e., International Small and Midcap Sp go up and down completely randomly.
Pair Corralation between International Small and Midcap Sp
Assuming the 90 days horizon International Small is expected to generate 11.02 times less return on investment than Midcap Sp. But when comparing it to its historical volatility, International Small Pany is 1.13 times less risky than Midcap Sp. It trades about 0.01 of its potential returns per unit of risk. Midcap Sp 400 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,363 in Midcap Sp 400 on September 3, 2024 and sell it today you would earn a total of 334.00 from holding Midcap Sp 400 or generate 14.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Small Pany vs. Midcap Sp 400
Performance |
| Timeline |
| International Small Pany |
| Midcap Sp 400 |
International Small and Midcap Sp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Small and Midcap Sp
The main advantage of trading using opposite International Small and Midcap Sp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Small position performs unexpectedly, Midcap Sp 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 Sp will offset losses from the drop in Midcap Sp's long position.The idea behind International Small Pany and Midcap Sp 400 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 Sp vs. Vanguard Mid Cap Index | Midcap Sp vs. Vanguard Mid Cap Index | Midcap Sp vs. Vanguard Mid Cap Index | Midcap Sp vs. Vanguard Mid Cap Index |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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