Correlation Between Inverse Mid-cap and Russell 2000
Can any of the company-specific risk be diversified away by investing in both Inverse Mid-cap and Russell 2000 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 Inverse Mid-cap and Russell 2000 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Inverse Mid Cap Strategy and Russell 2000 2x, you can compare the effects of market volatilities on Inverse Mid-cap and Russell 2000 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 Inverse Mid-cap with a short position of Russell 2000. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inverse Mid-cap and Russell 2000.
Diversification Opportunities for Inverse Mid-cap and Russell 2000
-0.9 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Inverse and Russell is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Inverse Mid Cap Strategy and Russell 2000 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russell 2000 2x and Inverse Mid-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 Inverse Mid Cap Strategy are associated (or correlated) with Russell 2000. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russell 2000 2x has no effect on the direction of Inverse Mid-cap i.e., Inverse Mid-cap and Russell 2000 go up and down completely randomly.
Pair Corralation between Inverse Mid-cap and Russell 2000
Assuming the 90 days horizon Inverse Mid Cap Strategy is expected to under-perform the Russell 2000. But the mutual fund apears to be less risky and, when comparing its historical volatility, Inverse Mid Cap Strategy is 2.23 times less risky than Russell 2000. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Russell 2000 2x is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 13,431 in Russell 2000 2x on August 24, 2024 and sell it today you would earn a total of 4,827 from holding Russell 2000 2x or generate 35.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Inverse Mid Cap Strategy vs. Russell 2000 2x
Performance |
| Timeline |
| Inverse Mid Cap |
| Russell 2000 2x |
Inverse Mid-cap and Russell 2000 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Inverse Mid-cap and Russell 2000
The main advantage of trading using opposite Inverse Mid-cap and Russell 2000 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inverse Mid-cap position performs unexpectedly, Russell 2000 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 Russell 2000 will offset losses from the drop in Russell 2000's long position.| Inverse Mid-cap vs. Invesco Global Health | Inverse Mid-cap vs. Allianzgi Health Sciences | Inverse Mid-cap vs. Blackrock Health Sciences | Inverse Mid-cap vs. Prudential Health Sciences |
| Russell 2000 vs. Aqr Large Cap | Russell 2000 vs. Tax Managed Large Cap | Russell 2000 vs. William Blair Large | Russell 2000 vs. Quantitative U S |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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