Correlation Between Growth Opportunities and Midcap Growth
Can any of the company-specific risk be diversified away by investing in both Growth Opportunities and Midcap 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 Growth Opportunities and Midcap Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Opportunities Fund and Midcap Growth Fund, you can compare the effects of market volatilities on Growth Opportunities and Midcap 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 Growth Opportunities with a short position of Midcap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Opportunities and Midcap Growth.
Diversification Opportunities for Growth Opportunities and Midcap Growth
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GROWTH and Midcap is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Growth Opportunities Fund and Midcap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Growth and Growth Opportunities 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 Growth Opportunities Fund are associated (or correlated) with Midcap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Growth has no effect on the direction of Growth Opportunities i.e., Growth Opportunities and Midcap Growth go up and down completely randomly.
Pair Corralation between Growth Opportunities and Midcap Growth
Assuming the 90 days horizon Growth Opportunities is expected to generate 2.41 times less return on investment than Midcap Growth. But when comparing it to its historical volatility, Growth Opportunities Fund is 1.17 times less risky than Midcap Growth. It trades about 0.3 of its potential returns per unit of risk. Midcap Growth Fund is currently generating about 0.61 of returns per unit of risk over similar time horizon. If you would invest 942.00 in Midcap Growth Fund on September 2, 2024 and sell it today you would earn a total of 147.00 from holding Midcap Growth Fund or generate 15.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Opportunities Fund vs. Midcap Growth Fund
Performance |
| Timeline |
| Growth Opportunities |
| Midcap Growth |
Growth Opportunities and Midcap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Opportunities and Midcap Growth
The main advantage of trading using opposite Growth Opportunities and Midcap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Opportunities position performs unexpectedly, Midcap 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 Midcap Growth will offset losses from the drop in Midcap Growth's long position.| Growth Opportunities vs. Mid Cap Value Profund | Growth Opportunities vs. Mutual Of America | Growth Opportunities vs. American Century Etf | Growth Opportunities vs. Heartland Value Plus |
| Midcap Growth vs. Strategic Asset Management | Midcap Growth vs. Strategic Asset Management | Midcap Growth vs. Strategic Asset Management | Midcap Growth vs. Strategic Asset Management |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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