Correlation Between Mid Cap and Capital World
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Capital World 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 Capital World 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 Capital World Growth, you can compare the effects of market volatilities on Mid Cap and Capital World 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 Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Capital World.
Diversification Opportunities for Mid Cap and Capital World
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mid and Capital is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Mid Cap i.e., Mid Cap and Capital World go up and down completely randomly.
Pair Corralation between Mid Cap and Capital World
Assuming the 90 days horizon Mid Cap Growth is expected to generate 1.42 times more return on investment than Capital World. However, Mid Cap is 1.42 times more volatile than Capital World Growth. It trades about 0.09 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.1 per unit of risk. If you would invest 3,312 in Mid Cap Growth on September 12, 2024 and sell it today you would earn a total of 833.00 from holding Mid Cap Growth or generate 25.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Cap Growth vs. Capital World Growth
Performance |
| Timeline |
| Mid Cap Growth |
| Capital World Growth |
Mid Cap and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Capital World
The main advantage of trading using opposite Mid Cap and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Mid Cap vs. Touchstone Sustainability And | Mid Cap vs. Growth Opportunities Fund | Mid Cap vs. Total Return Fund | Mid Cap vs. William Blair International |
| Capital World vs. T Rowe Price | Capital World vs. Mid Cap Growth | Capital World vs. Pace Smallmedium Growth | Capital World vs. Rational Defensive 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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