Correlation Between Smallcap Growth and Midcap Growth
Can any of the company-specific risk be diversified away by investing in both Smallcap Growth and Midcap Growth 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 Smallcap Growth and Midcap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Smallcap Growth Fund and Midcap Growth Fund, you can compare the effects of market volatilities on Smallcap Growth and Midcap Growth 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 Smallcap Growth with a short position of Midcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Smallcap Growth and Midcap Growth.
Diversification Opportunities for Smallcap Growth and Midcap Growth
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Smallcap and Midcap is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Smallcap Growth Fund and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Smallcap 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 Smallcap Growth Fund are associated (or correlated) with Midcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Smallcap Growth i.e., Smallcap Growth and Midcap Growth go up and down completely randomly.
Pair Corralation between Smallcap Growth and Midcap Growth
Assuming the 90 days horizon Smallcap Growth Fund is expected to generate 1.25 times more return on investment than Midcap Growth. However, Smallcap Growth is 1.25 times more volatile than Midcap Growth Fund. It trades about 0.09 of its potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.08 per unit of risk. If you would invest 1,479 in Smallcap Growth Fund on September 3, 2024 and sell it today you would earn a total of 250.00 from holding Smallcap Growth Fund or generate 16.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.95% |
| Values | Daily Returns |
Smallcap Growth Fund vs. Midcap Growth Fund
Performance |
| Timeline |
| Smallcap Growth |
| Midcap Growth |
Smallcap Growth and Midcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Smallcap Growth and Midcap Growth
The main advantage of trading using opposite Smallcap Growth and Midcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smallcap Growth position performs unexpectedly, Midcap Growth 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 Growth will offset losses from the drop in Midcap Growth's long position.| Smallcap Growth vs. Goldman Sachs Real | Smallcap Growth vs. Vanguard Reit Index | Smallcap Growth vs. Deutsche Real Estate | Smallcap Growth vs. Amg Managers Centersquare |
| Midcap Growth vs. T Rowe Price | Midcap Growth vs. T Rowe Price | Midcap Growth vs. T Rowe Price | Midcap Growth vs. T Rowe Price |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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