Correlation Between Mid Cap and Floating Rate
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Floating Rate 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 Mid Cap and Floating Rate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap 15x Strategy and Floating Rate Fund, you can compare the effects of market volatilities on Mid Cap and Floating Rate 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 Mid Cap with a short position of Floating Rate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Floating Rate.
Diversification Opportunities for Mid Cap and Floating Rate
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and Floating is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Floating Rate Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floating Rate and 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 Mid Cap 15x Strategy are associated (or correlated) with Floating Rate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floating Rate has no effect on the direction of Mid Cap i.e., Mid Cap and Floating Rate go up and down completely randomly.
Pair Corralation between Mid Cap and Floating Rate
Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 9.15 times more return on investment than Floating Rate. However, Mid Cap is 9.15 times more volatile than Floating Rate Fund. It trades about 0.06 of its potential returns per unit of risk. Floating Rate Fund is currently generating about 0.23 per unit of risk. If you would invest 9,658 in Mid Cap 15x Strategy on September 14, 2024 and sell it today you would earn a total of 4,628 from holding Mid Cap 15x Strategy or generate 47.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap 15x Strategy vs. Floating Rate Fund
Performance |
| Timeline |
| Mid Cap 15x |
| Floating Rate |
Mid Cap and Floating Rate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Floating Rate
The main advantage of trading using opposite Mid Cap and Floating Rate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Floating Rate 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 Floating Rate will offset losses from the drop in Floating Rate's long position.| Mid Cap vs. Baillie Gifford Health | Mid Cap vs. Lord Abbett Health | Mid Cap vs. Allianzgi Health Sciences | Mid Cap vs. Vanguard Health Care |
| Floating Rate vs. Mid Cap 15x Strategy | Floating Rate vs. Transamerica Emerging Markets | Floating Rate vs. Origin Emerging Markets | Floating Rate vs. Shelton Emerging Markets |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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