Correlation Between Midcap Growth and Inflation Protection
Can any of the company-specific risk be diversified away by investing in both Midcap Growth and Inflation Protection 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 Growth and Inflation Protection into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Midcap Growth Fund and Inflation Protection Fund, you can compare the effects of market volatilities on Midcap Growth and Inflation Protection 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 Growth with a short position of Inflation Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Growth and Inflation Protection.
Diversification Opportunities for Midcap Growth and Inflation Protection
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Midcap and Inflation is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Growth Fund and Inflation Protection Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inflation Protection and Midcap Growth 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 Growth Fund are associated (or correlated) with Inflation Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inflation Protection has no effect on the direction of Midcap Growth i.e., Midcap Growth and Inflation Protection go up and down completely randomly.
Pair Corralation between Midcap Growth and Inflation Protection
Assuming the 90 days horizon Midcap Growth Fund is expected to generate 3.8 times more return on investment than Inflation Protection. However, Midcap Growth is 3.8 times more volatile than Inflation Protection Fund. It trades about 0.59 of its potential returns per unit of risk. Inflation Protection Fund is currently generating about 0.08 per unit of risk. If you would invest 943.00 in Midcap Growth Fund on September 1, 2024 and sell it today you would earn a total of 146.00 from holding Midcap Growth Fund or generate 15.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Midcap Growth Fund vs. Inflation Protection Fund
Performance |
| Timeline |
| Midcap Growth |
| Inflation Protection |
Midcap Growth and Inflation Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Midcap Growth and Inflation Protection
The main advantage of trading using opposite Midcap Growth and Inflation Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Growth position performs unexpectedly, Inflation Protection 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 Inflation Protection will offset losses from the drop in Inflation Protection's long position.| Midcap Growth vs. Strategic Asset Management | Midcap Growth vs. Strategic Asset Management | Midcap Growth vs. Strategic Asset Management | Midcap Growth 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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