Correlation Between American Funds and Mid Cap
Can any of the company-specific risk be diversified away by investing in both American Funds and Mid Cap 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 American Funds and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Emerging and Mid Cap Growth, you can compare the effects of market volatilities on American Funds and Mid Cap 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 American Funds with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Mid Cap.
Diversification Opportunities for American Funds and Mid Cap
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Mid is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Emerging and Mid Cap Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and American Funds 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 American Funds Emerging are associated (or correlated) with Mid Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mid Cap Growth has no effect on the direction of American Funds i.e., American Funds and Mid Cap go up and down completely randomly.
Pair Corralation between American Funds and Mid Cap
Assuming the 90 days horizon American Funds is expected to generate 4.56 times less return on investment than Mid Cap. But when comparing it to its historical volatility, American Funds Emerging is 2.98 times less risky than Mid Cap. It trades about 0.07 of its potential returns per unit of risk. Mid Cap Growth is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,076 in Mid Cap Growth on September 14, 2024 and sell it today you would earn a total of 918.00 from holding Mid Cap Growth or generate 29.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
American Funds Emerging vs. Mid Cap Growth
Performance |
| Timeline |
| American Funds Emerging |
| Mid Cap Growth |
American Funds and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Mid Cap
The main advantage of trading using opposite American Funds and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Mid Cap 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 Mid Cap will offset losses from the drop in Mid Cap's long position.| American Funds vs. Mid Cap Growth | American Funds vs. Pace Smallmedium Growth | American Funds vs. T Rowe Price | American Funds vs. Franklin Growth Opportunities |
| Mid Cap vs. Touchstone Mid Cap | Mid Cap vs. Federated Mdt Small | Mid Cap vs. Harding Loevner International | Mid Cap vs. Sterling Capital Equity |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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