Correlation Between Banking Fund and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Banking Fund 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 Banking Fund and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banking Fund Class and Mid Cap 15x Strategy, you can compare the effects of market volatilities on Banking Fund 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 Banking Fund with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banking Fund and Mid Cap.
Diversification Opportunities for Banking Fund and Mid Cap
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Banking and Mid is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Banking Fund Class and Mid Cap 15x Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap 15x and Banking Fund 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 Banking Fund Class 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 15x has no effect on the direction of Banking Fund i.e., Banking Fund and Mid Cap go up and down completely randomly.
Pair Corralation between Banking Fund and Mid Cap
Assuming the 90 days horizon Banking Fund Class is expected to generate 0.8 times more return on investment than Mid Cap. However, Banking Fund Class is 1.25 times less risky than Mid Cap. It trades about -0.19 of its potential returns per unit of risk. Mid Cap 15x Strategy is currently generating about -0.26 per unit of risk. If you would invest 9,455 in Banking Fund Class on October 10, 2024 and sell it today you would lose (459.00) from holding Banking Fund Class or give up 4.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banking Fund Class vs. Mid Cap 15x Strategy
Performance |
| Timeline |
| Banking Fund Class |
| Mid Cap 15x |
Banking Fund and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banking Fund and Mid Cap
The main advantage of trading using opposite Banking Fund and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banking Fund 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.| Banking Fund vs. Leader Short Term Bond | Banking Fund vs. Virtus Multi Sector Short | Banking Fund vs. Cmg Ultra Short | Banking Fund vs. Transam Short Term Bond |
| Mid Cap vs. Ab Select Equity | Mid Cap vs. Dws Equity Sector | Mid Cap vs. Dreyfusstandish Global Fixed | Mid Cap vs. Ab Equity Income |
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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