Correlation Between Midcap Sp and Midcap Growth

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Midcap Sp 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 Midcap Sp and Midcap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Midcap Sp 400 and Midcap Growth Fund, you can compare the effects of market volatilities on Midcap Sp 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 Midcap Sp with a short position of Midcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Sp and Midcap Growth.

Diversification Opportunities for Midcap Sp and Midcap Growth

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Midcap and Midcap is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Sp 400 and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Midcap Sp 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 Sp 400 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 Midcap Sp i.e., Midcap Sp and Midcap Growth go up and down completely randomly.

Pair Corralation between Midcap Sp and Midcap Growth

Assuming the 90 days horizon Midcap Sp is expected to generate 1.1 times less return on investment than Midcap Growth. But when comparing it to its historical volatility, Midcap Sp 400 is 1.09 times less risky than Midcap Growth. It trades about 0.08 of its potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  927.00  in Midcap Growth Fund on August 31, 2024 and sell it today you would earn a total of  320.00  from holding Midcap Growth Fund or generate 34.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Midcap Sp 400  vs.  Midcap Growth Fund

 Performance 
       Timeline  
Midcap Sp 400 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Sp 400 are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Midcap Sp may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Midcap Growth 

Risk-Adjusted Performance

30 of 100

 
Weak
 
Strong
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Midcap Growth Fund are ranked lower than 30 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Midcap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Midcap Sp and Midcap Growth Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Midcap Sp and Midcap Growth

The main advantage of trading using opposite Midcap Sp and Midcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Sp 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.
The idea behind Midcap Sp 400 and Midcap Growth Fund 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.
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

Other Complementary Tools

Premium Stories
Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope
Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets