Correlation Between Small-cap Value and Mid Cap
Can any of the company-specific risk be diversified away by investing in both Small-cap Value 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 Small-cap Value and Mid Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Value Profund and Mid Cap Growth Profund, you can compare the effects of market volatilities on Small-cap Value 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 Small-cap Value with a short position of Mid Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Mid Cap.
Diversification Opportunities for Small-cap Value and Mid Cap
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Small-cap and Mid is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Mid Cap Growth Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mid Cap Growth and Small-cap Value 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 Small Cap Value Profund 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 Growth has no effect on the direction of Small-cap Value i.e., Small-cap Value and Mid Cap go up and down completely randomly.
Pair Corralation between Small-cap Value and Mid Cap
Assuming the 90 days horizon Small-cap Value is expected to generate 1.39 times less return on investment than Mid Cap. In addition to that, Small-cap Value is 1.29 times more volatile than Mid Cap Growth Profund. It trades about 0.03 of its total potential returns per unit of risk. Mid Cap Growth Profund is currently generating about 0.05 per unit of volatility. If you would invest 8,423 in Mid Cap Growth Profund on November 27, 2024 and sell it today you would earn a total of 1,960 from holding Mid Cap Growth Profund or generate 23.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Value Profund vs. Mid Cap Growth Profund
Performance |
| Timeline |
| Small Cap Value |
| Mid Cap Growth |
Small-cap Value and Mid Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small-cap Value and Mid Cap
The main advantage of trading using opposite Small-cap Value and Mid Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small-cap Value 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.| Small-cap Value vs. Prudential High Yield | Small-cap Value vs. Siit High Yield | Small-cap Value vs. Buffalo High Yield | Small-cap Value vs. Voya High Yield |
| Mid Cap vs. Small Cap Growth Profund | Mid Cap vs. Mid Cap Value Profund | Mid Cap vs. Small Cap Value Profund | Mid Cap vs. Mid Cap Profund Mid Cap |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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