Correlation Between International Equity and Midcap Growth
Can any of the company-specific risk be diversified away by investing in both International Equity 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 International Equity and Midcap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Equity Index and Midcap Growth Fund, you can compare the effects of market volatilities on International Equity 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 International Equity with a short position of Midcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Equity and Midcap Growth.
Diversification Opportunities for International Equity and Midcap Growth
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between International and Midcap is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding International Equity Index and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and International Equity 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 International Equity Index 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 International Equity i.e., International Equity and Midcap Growth go up and down completely randomly.
Pair Corralation between International Equity and Midcap Growth
Assuming the 90 days horizon International Equity is expected to generate 1.71 times less return on investment than Midcap Growth. But when comparing it to its historical volatility, International Equity Index is 1.38 times less risky than Midcap Growth. It trades about 0.05 of its potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 863.00 in Midcap Growth Fund on September 4, 2024 and sell it today you would earn a total of 339.00 from holding Midcap Growth Fund or generate 39.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
International Equity Index vs. Midcap Growth Fund
Performance |
| Timeline |
| International Equity |
| Midcap Growth |
International Equity and Midcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Equity and Midcap Growth
The main advantage of trading using opposite International Equity and Midcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Equity 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.| International Equity vs. Ab Global Risk | International Equity vs. Pioneer High Yield | International Equity vs. Siit High Yield | International Equity vs. Ab High Income |
| Midcap Growth vs. Delaware Limited Term Diversified | Midcap Growth vs. Wasatch Small Cap | Midcap Growth vs. Blackrock Sm Cap | Midcap Growth vs. Northern Small Cap |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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