Correlation Between Midcap Growth and International Equity
Can any of the company-specific risk be diversified away by investing in both Midcap Growth and International Equity 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 International Equity 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 International Equity Index, you can compare the effects of market volatilities on Midcap Growth and International Equity 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 International Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Growth and International Equity.
Diversification Opportunities for Midcap Growth and International Equity
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Midcap and International is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Growth Fund and International Equity Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Equity 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 International Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Equity has no effect on the direction of Midcap Growth i.e., Midcap Growth and International Equity go up and down completely randomly.
Pair Corralation between Midcap Growth and International Equity
Assuming the 90 days horizon Midcap Growth is expected to generate 1.07 times less return on investment than International Equity. In addition to that, Midcap Growth is 1.42 times more volatile than International Equity Index. It trades about 0.03 of its total potential returns per unit of risk. International Equity Index is currently generating about 0.04 per unit of volatility. If you would invest 1,053 in International Equity Index on September 4, 2024 and sell it today you would earn a total of 133.00 from holding International Equity Index or generate 12.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.93% |
| Values | Daily Returns |
Midcap Growth Fund vs. International Equity Index
Performance |
| Timeline |
| Midcap Growth |
| International Equity |
Midcap Growth and International Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Midcap Growth and International Equity
The main advantage of trading using opposite Midcap Growth and International Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Growth position performs unexpectedly, International Equity 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 International Equity will offset losses from the drop in International Equity's long position.| Midcap Growth vs. Inflation Protected Bond Fund | Midcap Growth vs. Cref Inflation Linked Bond | Midcap Growth vs. Tiaa Cref Inflation Linked Bond | Midcap Growth vs. Blackrock Inflation Protected |
| International Equity vs. Ab Global Risk | International Equity vs. Pioneer High Yield | International Equity vs. Siit High Yield | International Equity vs. Ab High Income |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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