Correlation Between Mid Cap and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Aggressive Growth 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 Aggressive Growth 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 Aggressive Growth Fund, you can compare the effects of market volatilities on Mid Cap and Aggressive Growth 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 Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Aggressive Growth.
Diversification Opportunities for Mid Cap and Aggressive Growth
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mid and Aggressive is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth 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 Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Mid Cap i.e., Mid Cap and Aggressive Growth go up and down completely randomly.
Pair Corralation between Mid Cap and Aggressive Growth
Assuming the 90 days horizon Mid Cap Growth is expected to generate 1.08 times more return on investment than Aggressive Growth. However, Mid Cap is 1.08 times more volatile than Aggressive Growth Fund. It trades about 0.24 of its potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.17 per unit of risk. If you would invest 3,469 in Mid Cap Growth on September 12, 2024 and sell it today you would earn a total of 600.00 from holding Mid Cap Growth or generate 17.3% 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. Aggressive Growth Fund
Performance |
| Timeline |
| Mid Cap Growth |
| Aggressive Growth |
Mid Cap and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Aggressive Growth
The main advantage of trading using opposite Mid Cap and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Aggressive Growth 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.The idea behind Mid Cap Growth and Aggressive Growth 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.| Aggressive Growth vs. Western Asset High | Aggressive Growth vs. Fa 529 Aggressive | Aggressive Growth vs. Metropolitan West High | Aggressive Growth vs. Siit High Yield |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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