Correlation Between Mid Cap and World Energy
Can any of the company-specific risk be diversified away by investing in both Mid Cap and World Energy 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 World Energy 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 World Energy Fund, you can compare the effects of market volatilities on Mid Cap and World Energy 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 World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and World Energy.
Diversification Opportunities for Mid Cap and World Energy
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mid and World is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy 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 World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Mid Cap i.e., Mid Cap and World Energy go up and down completely randomly.
Pair Corralation between Mid Cap and World Energy
Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 1.24 times more return on investment than World Energy. However, Mid Cap is 1.24 times more volatile than World Energy Fund. It trades about 0.04 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.03 per unit of risk. If you would invest 10,435 in Mid Cap 15x Strategy on October 11, 2024 and sell it today you would earn a total of 2,974 from holding Mid Cap 15x Strategy or generate 28.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap 15x Strategy vs. World Energy Fund
Performance |
| Timeline |
| Mid Cap 15x |
| World Energy |
Mid Cap and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and World Energy
The main advantage of trading using opposite Mid Cap and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.| Mid Cap vs. Virtus Multi Strategy Target | Mid Cap vs. Calvert Emerging Markets | Mid Cap vs. Oberweis Emerging Growth | Mid Cap vs. Fidelity Series Emerging |
| World Energy vs. Black Oak Emerging | World Energy vs. Nasdaq 100 2x Strategy | World Energy vs. Balanced Strategy Fund | World Energy vs. Mid Cap 15x Strategy |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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