Correlation Between Mid Cap and High Yield
Can any of the company-specific risk be diversified away by investing in both Mid Cap and High Yield 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 High Yield 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 High Yield Fund, you can compare the effects of market volatilities on Mid Cap and High Yield 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 High Yield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Cap and High Yield.
Diversification Opportunities for Mid Cap and High Yield
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Mid and High is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Mid Cap Growth and High Yield Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Yield Fund 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 High Yield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Yield Fund has no effect on the direction of Mid Cap i.e., Mid Cap and High Yield go up and down completely randomly.
Pair Corralation between Mid Cap and High Yield
Assuming the 90 days horizon Mid Cap Growth is expected to generate 6.98 times more return on investment than High Yield. However, Mid Cap is 6.98 times more volatile than High Yield Fund. It trades about 0.38 of its potential returns per unit of risk. High Yield Fund is currently generating about 0.17 per unit of risk. If you would invest 3,979 in Mid Cap Growth on August 31, 2024 and sell it today you would earn a total of 444.00 from holding Mid Cap Growth or generate 11.16% 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. High Yield Fund
Performance |
| Timeline |
| Mid Cap Growth |
| High Yield Fund |
Mid Cap and High Yield Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Cap and High Yield
The main advantage of trading using opposite Mid Cap and High Yield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Cap position performs unexpectedly, High Yield 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 High Yield will offset losses from the drop in High Yield's long position.| Mid Cap vs. Wasatch Small Cap | Mid Cap vs. Victory Trivalent International | Mid Cap vs. John Hancock Disciplined | Mid Cap vs. Mfs Mid Cap |
| High Yield vs. Artisan Select Equity | High Yield vs. Huber Capital Equity | High Yield vs. Calamos Global Equity | High Yield vs. Jpmorgan Equity 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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