Correlation Between Blue Chip and Edge Midcap
Can any of the company-specific risk be diversified away by investing in both Blue Chip and Edge Midcap 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 Blue Chip and Edge Midcap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Chip Fund and Edge Midcap Fund, you can compare the effects of market volatilities on Blue Chip and Edge Midcap 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 Blue Chip with a short position of Edge Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Chip and Edge Midcap.
Diversification Opportunities for Blue Chip and Edge Midcap
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Blue and Edge is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Blue Chip Fund and Edge Midcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edge Midcap Fund and Blue Chip 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 Blue Chip Fund are associated (or correlated) with Edge Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edge Midcap Fund has no effect on the direction of Blue Chip i.e., Blue Chip and Edge Midcap go up and down completely randomly.
Pair Corralation between Blue Chip and Edge Midcap
Assuming the 90 days horizon Blue Chip Fund is expected to generate 0.95 times more return on investment than Edge Midcap. However, Blue Chip Fund is 1.05 times less risky than Edge Midcap. It trades about 0.13 of its potential returns per unit of risk. Edge Midcap Fund is currently generating about 0.08 per unit of risk. If you would invest 3,201 in Blue Chip Fund on September 1, 2024 and sell it today you would earn a total of 1,515 from holding Blue Chip Fund or generate 47.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.46% |
| Values | Daily Returns |
Blue Chip Fund vs. Edge Midcap Fund
Performance |
| Timeline |
| Blue Chip Fund |
| Edge Midcap Fund |
Blue Chip and Edge Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Chip and Edge Midcap
The main advantage of trading using opposite Blue Chip and Edge Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Chip position performs unexpectedly, Edge Midcap 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 Edge Midcap will offset losses from the drop in Edge Midcap's long position.| Blue Chip vs. Us Government Securities | Blue Chip vs. Virtus Seix Government | Blue Chip vs. Ab Government Exchange | Blue Chip vs. Inverse Government Long |
| Edge Midcap vs. Barings Emerging Markets | Edge Midcap vs. Calvert Emerging Markets | Edge Midcap vs. Siit Emerging Markets | Edge Midcap vs. Goldman Sachs Emerging |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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