Correlation Between Paradigm Micro-cap and Touchstone Mid
Can any of the company-specific risk be diversified away by investing in both Paradigm Micro-cap and Touchstone Mid 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 Paradigm Micro-cap and Touchstone Mid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paradigm Micro Cap Fund and Touchstone Mid Cap, you can compare the effects of market volatilities on Paradigm Micro-cap and Touchstone Mid 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 Paradigm Micro-cap with a short position of Touchstone Mid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paradigm Micro-cap and Touchstone Mid.
Diversification Opportunities for Paradigm Micro-cap and Touchstone Mid
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Paradigm and Touchstone is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Paradigm Micro Cap Fund and Touchstone Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchstone Mid Cap and Paradigm Micro-cap 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 Paradigm Micro Cap Fund are associated (or correlated) with Touchstone Mid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchstone Mid Cap has no effect on the direction of Paradigm Micro-cap i.e., Paradigm Micro-cap and Touchstone Mid go up and down completely randomly.
Pair Corralation between Paradigm Micro-cap and Touchstone Mid
Assuming the 90 days horizon Paradigm Micro Cap Fund is expected to generate 1.51 times more return on investment than Touchstone Mid. However, Paradigm Micro-cap is 1.51 times more volatile than Touchstone Mid Cap. It trades about 0.23 of its potential returns per unit of risk. Touchstone Mid Cap is currently generating about 0.34 per unit of risk. If you would invest 5,599 in Paradigm Micro Cap Fund on September 1, 2024 and sell it today you would earn a total of 413.00 from holding Paradigm Micro Cap Fund or generate 7.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paradigm Micro Cap Fund vs. Touchstone Mid Cap
Performance |
| Timeline |
| Paradigm Micro Cap |
| Touchstone Mid Cap |
Paradigm Micro-cap and Touchstone Mid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paradigm Micro-cap and Touchstone Mid
The main advantage of trading using opposite Paradigm Micro-cap and Touchstone Mid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paradigm Micro-cap position performs unexpectedly, Touchstone Mid 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 Touchstone Mid will offset losses from the drop in Touchstone Mid's long position.| Paradigm Micro-cap vs. Paradigm Select Fund | Paradigm Micro-cap vs. Needham Aggressive Growth | Paradigm Micro-cap vs. Ultramid Cap Profund Ultramid Cap | Paradigm Micro-cap vs. Towle Deep Value |
| Touchstone Mid vs. Value Line Mid | Touchstone Mid vs. Boston Partners All Cap | Touchstone Mid vs. Scout Mid Cap | Touchstone Mid vs. Paradigm Select Fund |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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