Correlation Between Inflation Protection and Midcap Fund
Can any of the company-specific risk be diversified away by investing in both Inflation Protection and Midcap Fund 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 Inflation Protection and Midcap Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inflation Protection Fund and Midcap Fund R 1, you can compare the effects of market volatilities on Inflation Protection and Midcap Fund 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 Inflation Protection with a short position of Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inflation Protection and Midcap Fund.
Diversification Opportunities for Inflation Protection and Midcap Fund
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Inflation and Midcap is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Inflation Protection Fund and Midcap Fund R 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund R and Inflation Protection 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 Inflation Protection Fund are associated (or correlated) with Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund R has no effect on the direction of Inflation Protection i.e., Inflation Protection and Midcap Fund go up and down completely randomly.
Pair Corralation between Inflation Protection and Midcap Fund
Assuming the 90 days horizon Inflation Protection is expected to generate 22.53 times less return on investment than Midcap Fund. But when comparing it to its historical volatility, Inflation Protection Fund is 3.5 times less risky than Midcap Fund. It trades about 0.04 of its potential returns per unit of risk. Midcap Fund R 1 is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,866 in Midcap Fund R 1 on August 28, 2024 and sell it today you would earn a total of 231.00 from holding Midcap Fund R 1 or generate 5.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inflation Protection Fund vs. Midcap Fund R 1
Performance |
| Timeline |
| Inflation Protection |
| Midcap Fund R |
Inflation Protection and Midcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inflation Protection and Midcap Fund
The main advantage of trading using opposite Inflation Protection and Midcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inflation Protection position performs unexpectedly, Midcap Fund 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 Fund will offset losses from the drop in Midcap Fund's long position.The idea behind Inflation Protection Fund and Midcap Fund R 1 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Midcap Fund vs. Strategic Asset Management | Midcap Fund vs. Strategic Asset Management | Midcap Fund vs. Strategic Asset Management | Midcap Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |