Correlation Between Mid Cap and Sentinel Small
Can any of the company-specific risk be diversified away by investing in both Mid Cap and Sentinel Small 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 Sentinel Small 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 Sentinel Small, you can compare the effects of market volatilities on Mid Cap and Sentinel Small 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 Sentinel Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and Sentinel Small.
Diversification Opportunities for Mid Cap and Sentinel Small
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mid and Sentinel is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and Sentinel Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sentinel Small 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 Sentinel Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sentinel Small has no effect on the direction of Mid Cap i.e., Mid Cap and Sentinel Small go up and down completely randomly.
Pair Corralation between Mid Cap and Sentinel Small
Assuming the 90 days horizon Mid Cap Growth is expected to generate 0.99 times more return on investment than Sentinel Small. However, Mid Cap Growth is 1.01 times less risky than Sentinel Small. It trades about 0.07 of its potential returns per unit of risk. Sentinel Small is currently generating about 0.04 per unit of risk. If you would invest 3,186 in Mid Cap Growth on November 5, 2024 and sell it today you would earn a total of 1,258 from holding Mid Cap Growth or generate 39.49% 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. Sentinel Small
Performance |
| Timeline |
| Mid Cap Growth |
| Sentinel Small |
Mid Cap and Sentinel Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and Sentinel Small
The main advantage of trading using opposite Mid Cap and Sentinel Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, Sentinel Small 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 Sentinel Small will offset losses from the drop in Sentinel Small's long position.| Mid Cap vs. Touchstone Mid Cap | Mid Cap vs. Federated Mdt Small | Mid Cap vs. Harding Loevner International | Mid Cap vs. Sterling Capital Equity |
| Sentinel Small vs. Jpmorgan Diversified Fund | Sentinel Small vs. Jhancock Diversified Macro | Sentinel Small vs. Federated Hermes Conservative | Sentinel Small vs. Wilmington Diversified Income |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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