Correlation Between Energy Fund and Inverse Mid-cap
Can any of the company-specific risk be diversified away by investing in both Energy Fund and Inverse 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 Energy Fund and Inverse Mid-cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Fund Class and Inverse Mid Cap Strategy, you can compare the effects of market volatilities on Energy Fund and Inverse 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 Energy Fund with a short position of Inverse Mid-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Fund and Inverse Mid-cap.
Diversification Opportunities for Energy Fund and Inverse Mid-cap
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Energy and Inverse is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Energy Fund Class and Inverse Mid Cap Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Mid Cap and Energy 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 Energy Fund Class are associated (or correlated) with Inverse 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 Inverse Mid Cap has no effect on the direction of Energy Fund i.e., Energy Fund and Inverse Mid-cap go up and down completely randomly.
Pair Corralation between Energy Fund and Inverse Mid-cap
Assuming the 90 days horizon Energy Fund Class is expected to generate 1.25 times more return on investment than Inverse Mid-cap. However, Energy Fund is 1.25 times more volatile than Inverse Mid Cap Strategy. It trades about 0.08 of its potential returns per unit of risk. Inverse Mid Cap Strategy is currently generating about -0.17 per unit of risk. If you would invest 19,945 in Energy Fund Class on August 31, 2024 and sell it today you would earn a total of 1,163 from holding Energy Fund Class or generate 5.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energy Fund Class vs. Inverse Mid Cap Strategy
Performance |
| Timeline |
| Energy Fund Class |
| Inverse Mid Cap |
Energy Fund and Inverse Mid-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energy Fund and Inverse Mid-cap
The main advantage of trading using opposite Energy Fund and Inverse Mid-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Fund position performs unexpectedly, Inverse 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 Inverse Mid-cap will offset losses from the drop in Inverse Mid-cap's long position.| Energy Fund vs. Alphacentric Lifesci Healthcare | Energy Fund vs. Blackrock Health Sciences | Energy Fund vs. Baillie Gifford Health | Energy Fund vs. Fidelity Advisor Health |
| Inverse Mid-cap vs. Ab Small Cap | Inverse Mid-cap vs. Us Small Cap | Inverse Mid-cap vs. Champlain Small | Inverse Mid-cap vs. Legg Mason Partners |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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