Correlation Between Mid Cap and Nebraska Municipal

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Can any of the company-specific risk be diversified away by investing in both Mid Cap and Nebraska Municipal 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 Nebraska Municipal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Cap Growth and Nebraska Municipal Fund, you can compare the effects of market volatilities on Mid Cap and Nebraska Municipal 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 Nebraska Municipal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Nebraska Municipal.

Diversification Opportunities for Mid Cap and Nebraska Municipal

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between Mid and Nebraska is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Nebraska Municipal Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nebraska Municipal 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 Growth are associated (or correlated) with Nebraska Municipal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nebraska Municipal has no effect on the direction of Mid Cap i.e., Mid Cap and Nebraska Municipal go up and down completely randomly.

Pair Corralation between Mid Cap and Nebraska Municipal

Assuming the 90 days horizon Mid Cap Growth is expected to generate 9.0 times more return on investment than Nebraska Municipal. However, Mid Cap is 9.0 times more volatile than Nebraska Municipal Fund. It trades about 0.1 of its potential returns per unit of risk. Nebraska Municipal Fund is currently generating about 0.48 per unit of risk. If you would invest  4,055  in Mid Cap Growth on September 12, 2024 and sell it today you would earn a total of  90.00  from holding Mid Cap Growth or generate 2.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Mid Cap Growth  vs.  Nebraska Municipal Fund

 Performance 
       Timeline  
Mid Cap Growth 

Risk-Adjusted Performance

19 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Mid Cap Growth are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Mid Cap showed solid returns over the last few months and may actually be approaching a breakup point.
Nebraska Municipal 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Nebraska Municipal Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Nebraska Municipal is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mid Cap and Nebraska Municipal Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mid Cap and Nebraska Municipal

The main advantage of trading using opposite Mid Cap and Nebraska Municipal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Nebraska Municipal 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 Nebraska Municipal will offset losses from the drop in Nebraska Municipal's long position.
The idea behind Mid Cap Growth and Nebraska Municipal Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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