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 Retirement and Mid Cap Spdr, 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
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between American and Mid is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Retirement and Mid Cap Spdr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Spdr 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 Retirement 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 Spdr 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 1.98 times less return on investment than Mid Cap. But when comparing it to its historical volatility, American Funds Retirement is 2.49 times less risky than Mid Cap. It trades about 0.09 of its potential returns per unit of risk. Mid Cap Spdr is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 45,818 in Mid Cap Spdr on August 24, 2024 and sell it today you would earn a total of 14,241 from holding Mid Cap Spdr or generate 31.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Retirement vs. Mid Cap Spdr
Performance |
| Timeline |
| American Funds Retirement |
| Mid Cap Spdr |
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. Nuveen Global Real | American Funds vs. Artisan Global Unconstrained | American Funds vs. Barings Global Floating | American Funds vs. Commonwealth Global Fund |
| Mid Cap vs. Tiaa Cref Lifecycle Retirement | Mid Cap vs. Dimensional Retirement Income | Mid Cap vs. Pgim Conservative Retirement | Mid Cap vs. American Funds Retirement |
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.
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