Correlation Between Midcap Growth and Preferred Securities
Can any of the company-specific risk be diversified away by investing in both Midcap Growth and Preferred Securities 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 Preferred Securities 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 Preferred Securities Fund, you can compare the effects of market volatilities on Midcap Growth and Preferred Securities 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 Preferred Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Growth and Preferred Securities.
Diversification Opportunities for Midcap Growth and Preferred Securities
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Midcap and Preferred is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Growth Fund and Preferred Securities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Securities 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 Preferred Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Securities has no effect on the direction of Midcap Growth i.e., Midcap Growth and Preferred Securities go up and down completely randomly.
Pair Corralation between Midcap Growth and Preferred Securities
Assuming the 90 days horizon Midcap Growth Fund is expected to generate 7.22 times more return on investment than Preferred Securities. However, Midcap Growth is 7.22 times more volatile than Preferred Securities Fund. It trades about 0.3 of its potential returns per unit of risk. Preferred Securities Fund is currently generating about -0.15 per unit of risk. If you would invest 768.00 in Midcap Growth Fund on August 29, 2024 and sell it today you would earn a total of 60.00 from holding Midcap Growth Fund or generate 7.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Midcap Growth Fund vs. Preferred Securities Fund
Performance |
| Timeline |
| Midcap Growth |
| Preferred Securities |
Midcap Growth and Preferred Securities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Midcap Growth and Preferred Securities
The main advantage of trading using opposite Midcap Growth and Preferred Securities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Growth position performs unexpectedly, Preferred Securities 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 Preferred Securities will offset losses from the drop in Preferred Securities' 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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