Correlation Between Mid Cap and Omni Small-cap
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Omni Small-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 Mid Cap and Omni Small-cap 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 Omni Small Cap Value, you can compare the effects of market volatilities on Mid Cap and Omni Small-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 Mid Cap with a short position of Omni Small-cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Omni Small-cap.
Diversification Opportunities for Mid Cap and Omni Small-cap
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Mid and Omni is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap 15x Strategy and Omni Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Omni Small Cap 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 Omni Small-cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Omni Small Cap has no effect on the direction of Mid Cap i.e., Mid Cap and Omni Small-cap go up and down completely randomly.
Pair Corralation between Mid Cap and Omni Small-cap
Assuming the 90 days horizon Mid Cap 15x Strategy is expected to generate 0.93 times more return on investment than Omni Small-cap. However, Mid Cap 15x Strategy is 1.08 times less risky than Omni Small-cap. It trades about -0.22 of its potential returns per unit of risk. Omni Small Cap Value is currently generating about -0.43 per unit of risk. If you would invest 14,432 in Mid Cap 15x Strategy on October 11, 2024 and sell it today you would lose (1,023) from holding Mid Cap 15x Strategy or give up 7.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap 15x Strategy vs. Omni Small Cap Value
Performance |
| Timeline |
| Mid Cap 15x |
| Omni Small Cap |
Mid Cap and Omni Small-cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Omni Small-cap
The main advantage of trading using opposite Mid Cap and Omni Small-cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Omni Small-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 Omni Small-cap will offset losses from the drop in Omni Small-cap's long position.| Mid Cap vs. Virtus Multi Sector Short | Mid Cap vs. Touchstone Ultra Short | Mid Cap vs. Abr Enhanced Short | Mid Cap vs. Rbc Short Duration |
| Omni Small-cap vs. The Gabelli Healthcare | Omni Small-cap vs. The Hartford Healthcare | Omni Small-cap vs. Tekla Healthcare Investors | Omni Small-cap vs. Vanguard Health Care |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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