Correlation Between Mid Cap and American Funds
Can any of the company-specific risk be diversified away by investing in both Mid Cap and American Funds 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 American Funds 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 American Funds 2040, you can compare the effects of market volatilities on Mid Cap and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and American Funds.
Diversification Opportunities for Mid Cap and American Funds
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mid and American is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and American Funds 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2040 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2040 has no effect on the direction of Mid Cap i.e., Mid Cap and American Funds go up and down completely randomly.
Pair Corralation between Mid Cap and American Funds
Assuming the 90 days horizon Mid Cap Growth is expected to generate 2.14 times more return on investment than American Funds. However, Mid Cap is 2.14 times more volatile than American Funds 2040. It trades about 0.24 of its potential returns per unit of risk. American Funds 2040 is currently generating about 0.02 per unit of risk. If you would invest 3,615 in Mid Cap Growth on August 25, 2024 and sell it today you would earn a total of 451.00 from holding Mid Cap Growth or generate 12.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Growth vs. American Funds 2040
Performance |
| Timeline |
| Mid Cap Growth |
| American Funds 2040 |
Mid Cap and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and American Funds
The main advantage of trading using opposite Mid Cap and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Mid Cap vs. Touchstone Sustainability And | Mid Cap vs. Growth Opportunities Fund | Mid Cap vs. Total Return Fund |
| American Funds vs. Franklin Growth Opportunities | American Funds vs. Qs Moderate Growth | American Funds vs. Rational Defensive Growth | American Funds vs. Mid Cap Growth |
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.
Other Complementary Tools
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |